EXHIBIT 99.2
EXECUTION COPY
PURCHASE AGREEMENT
by and between
The ▇▇▇▇▇▇▇▇ Companies, Inc., ▇▇▇▇▇▇▇▇ Gas Pipeline Company, LLC,
▇▇▇▇▇▇▇▇ Western Pipeline Company LLC, and Kern River Acquisition, LLC,
as Sellers
and
MidAmerican Energy Holdings Company, KR Holding, LLC,
KR Acquisition 1, LLC and KR Acquisition 2, LLC,
as Buyers,
for the purchase and sale of
all general partnership interests of
Kern River Gas Transmission Company,
a Texas general partnership
Dated as of
March 7, 2002
TABLE OF CONTENTS
Page
ARTICLE I.
SALE AND PURCHASE
SECTION 1.1. Agreement to Sell and to Purchase......................2
SECTION 1.2. Closing................................................2
SECTION 1.3. Purchase Price.........................................2
SECTION 1.4. Adjustment to Purchase Price...........................2
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
SECTION 2.1. Corporate Organization.................................6
SECTION 2.2. Capitalization; Title..................................6
SECTION 2.3. Subsidiaries and Equity Interests......................6
SECTION 2.4. Validity of Agreement; Authorization...................7
SECTION 2.5. No Conflict or Violation...............................7
SECTION 2.6. Consents and Approvals.................................7
SECTION 2.7. Financial Statements...................................7
SECTION 2.8. Absence of Certain Changes or Events...................8
SECTION 2.9. Tax Matters............................................8
SECTION 2.10. Absence of Undisclosed Liabilities.....................9
SECTION 2.11. Real and Personal Property; Sufficiency of Assets
of the Company........................................9
SECTION 2.12. Regulatory Matters....................................11
SECTION 2.13. Intellectual Property.................................11
SECTION 2.14. Licenses, Permits and Governmental Approvals..........14
SECTION 2.15. Compliance with Law...................................14
SECTION 2.16. Litigation............................................15
SECTION 2.17. Contracts.............................................15
SECTION 2.18. Books and Records of the Company......................16
SECTION 2.19. Expansion Projects....................................16
SECTION 2.20. Employee Plans........................................16
SECTION 2.21. Existing Firm Transportation Customers;
Expansion Customers..................................17
SECTION 2.22. Insurance.............................................17
SECTION 2.23. Transactions with Directors, Officers and Affiliates..18
SECTION 2.24. Environmental; Health and Safety Matters..............18
SECTION 2.25. Brokers...............................................21
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE BUYERS
SECTION 3.1. Corporate Organization................................21
SECTION 3.2. Validity of Agreement.................................21
SECTION 3.3. No Conflict or Violation; No Defaults.................22
SECTION 3.4. Consents and Approvals................................22
SECTION 3.5. Brokers...............................................22
SECTION 3.6. Financial Ability.....................................22
ARTICLE IV.
COVENANTS
SECTION 4.1. Certain Changes and Conduct of Business...............22
SECTION 4.2. Access to Properties and Records......................25
SECTION 4.3. Employee Matters......................................25
SECTION 4.4. Consents and Approvals................................27
SECTION 4.5. Further Assurances....................................27
SECTION 4.6. Reasonable Best Efforts...............................27
SECTION 4.7. Notice of Breach......................................27
SECTION 4.8. Confidential Information..............................27
SECTION 4.9. Non-Solicitation of Clients and Employees.............28
SECTION 4.10. Negotiations..........................................29
SECTION 4.11. Tax Covenants.........................................30
SECTION 4.12. Development of Migration Plan.........................31
SECTION 4.13. Guarantees............................................31
SECTION 4.14. Bonds.................................................31
SECTION 4.15. Insurance.............................................31
SECTION 4.16. Audited Financial Statements..........................32
SECTION 4.17. Master Alliance Agreement.............................32
SECTION 4.18. Expansion Projects....................................32
SECTION 4.19. Covenant to Assign....................................33
SECTION 4.20. Manuals...............................................34
SECTION 4.21. Trademark License.....................................34
SECTION 4.22. Software License......................................34
ARTICLE V.
CONDITIONS TO OBLIGATIONS OF THE BUYERS
SECTION 5.1. Receipt of Documents..................................36
SECTION 5.2. Representations and Warranties of the Sellers.........36
SECTION 5.3. Performance of the Sellers' Obligations...............36
SECTION 5.4. Consents and Approvals................................36
SECTION 5.5. No Violation of Orders................................36
SECTION 5.6. No Material Adverse Change............................36
SECTION 5.7. Intentionally deleted.................................37
SECTION 5.8. Opinion of Counsel....................................37
SECTION 5.9. Transition Services and Construction Management
Agreement............................................37
SECTION 5.10. Resignations..........................................37
SECTION 5.11. Seller Parent Stock Purchase..........................37
SECTION 5.12. Tax Certificate.......................................37
SECTION 5.13. Financial Statements..................................37
SECTION 5.14. Ratings...............................................37
SECTION 5.15. Workforce Agreement...................................38
ARTICLE VI.
CONDITIONS TO OBLIGATIONS OF THE SELLERS
SECTION 6.1. Representations and Warranties of the Buyers..........38
SECTION 6.2. Performance of the Buyers' Obligations................38
SECTION 6.3. Consents and Approvals................................38
SECTION 6.4. No Violation of Orders................................38
SECTION 6.5. Seller Parent Stock Purchase..........................38
SECTION 6.6. Opinion of Counsel....................................38
SECTION 6.7. Services Agreement....................................39
SECTION 6.8. Ratings...............................................39
SECTION 6.9. Workforce Agreement...................................39
SECTION 6.10. Receipt of Documents..................................39
ARTICLE VII.
TERMINATION AND ABANDONMENT
SECTION 7.1. Methods of Termination; Upset Date....................39
SECTION 7.2. Procedure Upon Termination............................40
ARTICLE VIII.
INDEMNIFICATION
SECTION 8.1. Survival..............................................40
SECTION 8.2. Indemnification Coverage..............................40
SECTION 8.3. Procedures............................................42
SECTION 8.4. Remedy................................................43
ARTICLE IX.
MISCELLANEOUS PROVISIONS
SECTION 9.1. Common Facilities.....................................43
SECTION 9.2. Publicity.............................................43
SECTION 9.3. Successors and Assigns; No Third-Party Beneficiaries..43
SECTION 9.4. Investment Bankers, Financial Advisors, Brokers
and Finders..........................................44
SECTION 9.5. Fees and Expenses.....................................44
SECTION 9.6. Notices...............................................44
SECTION 9.7. Entire Agreement......................................45
SECTION 9.8. Waivers and Amendments................................46
SECTION 9.9. Severability..........................................46
SECTION 9.10. Titles and Headings...................................46
SECTION 9.11. Signatures and Counterparts...........................46
SECTION 9.12. Enforcement of the Agreement..........................46
SECTION 9.13. Governing Law.........................................47
SECTION 9.14. Certain Definitions...................................47
SECTION 9.15. Consent to Jurisdiction; Exclusive Forum..............48
Disclosure Schedules
--------------------
Schedule 1.4 Working Capital
Schedule 2.1 Corporate Organization
Schedule 2.2 Capitalization; Title
Schedule 2.5 No Conflict or Violation
Schedule 2.6 Consents and Approvals
Schedule 2.7 Financial Statements
Schedule 2.8 Absence of Certain Changes or Events
Schedule 2.9 Tax Matters
Schedule 2.10 Absence of Undisclosed Liabilities
Schedule 2.11 Real and Personal Property; Sufficiency of Assets of
the Company
Schedule 2.13 Intellectual Property
Schedule 2.14 Licenses, Permits and Governmental Approvals
Schedule 2.15 Compliance with Law
Schedule 2.16 Litigation
Schedule 2.17 Contracts
Schedule 2.19 Expansion Projects
Schedule 2.20 Employee Plans
Schedule 2.21 Existing Firm Transportation Customers; Expansion
Customers
Schedule 2.22 Insurance
Schedule 2.23 Transactions with Directors, Officers and Affiliates
Schedule 2.24 Environmental; Health and Safety Matters
Schedule 2.25 Sellers' Brokers
Schedule 3.4 Consents and Approvals
Schedule 3.5 Buyers' Brokers
Schedule 4.1 Certain Changes and Conduct of Business
Schedule 4.12 Development of Migration Plan
Schedule 4.17 Master Alliance Agreement
Schedule 4.18 Expansion Projects
Schedule 5.4 Consents and Approvals
Schedule 5.7 Discharge of Indebtedness; Release of Liens
Schedule 5.8 Opinion of Counsel
Schedule 5.9 Transition Services and Construction Management
Agreement
Schedule 5.10 Resignations
Schedule 5.12 Tax Certificate
Schedule 5.15 Workforce Agreement
Schedule 6.3 Consents and Approvals
Schedule 6.6 Opinion of Counsel
Schedule 8.2 Indemnification Coverage
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of this 7th day of March, 2002, by and between The ▇▇▇▇▇▇▇▇ Companies,
Inc., a Delaware corporation ("Seller Parent"), ▇▇▇▇▇▇▇▇ Gas Pipeline Company,
LLC, a Delaware limited liability Company ("Holdco"), ▇▇▇▇▇▇▇▇ Western Pipeline
Company LLC, a Delaware limited liability company ("LLC1"), Kern River
Acquisition, LLC, a Delaware limited liability company ("LLC2", and together
with Seller Parent, Holdco and LLC1, the "Sellers" ), MidAmerican Energy
Holdings Company, an Iowa corporation ("Buyer Parent"), KR Holding, LLC, a
Delaware limited liability company ("Buyer Holdco"), KR Acquisition 1, LLC, a
Delaware limited liability company ("Buyer1") and KR Acquisition 2, LLC, a
Delaware limited liability company ("Buyer2", and together with Buyer Parent,
Buyer Holdco and Buyer1, the "Buyers").
W I T N E S S E T H:
WHEREAS, Seller Parent owns 100% of the issued and outstanding
limited liability company interests of Holdco; and
WHEREAS, Holdco owns 100% of the issued and outstanding
limited liability company interests of LLC1 and 100% of the issued and
outstanding limited liability company interests of LLC2; and
WHEREAS, LLC1 and LLC2 each own 50% of the partnership
interests (collectively, the "Interests") of Kern River Gas Transmission
Company, a Texas general partnership (the "Company"); and
WHEREAS, Buyer Parent owns 100% of the issued and outstanding
limited liability company interests of Buyer Holdco; and
WHEREAS, Buyer Holdco owns 100% of the issued and outstanding
limited liability company interests of Buyer1 and 100% of the issued and
outstanding limited liability company interests of Buyer2; and
WHEREAS, Buyer1 desires to purchase all of the Interests held
by LLC1, and LLC1 desires to sell its Interests to Buyer1, in each case upon the
terms and subject to the conditions set forth in this Agreement; and
WHEREAS, Buyer2 desires to purchase all of the Interests held
by LLC2, and LLC2 desires to sell its Interests to Buyer2, in each case upon the
terms and subject to the conditions set forth in this Agreement; and
NOW, THEREFORE, in consideration of the mutual terms,
conditions and other agreements set forth herein, the parties hereto hereby
agree as follows:
ARTICLE I.
SALE AND PURCHASE
SECTION 1.1. Agreement to Sell and to Purchase. On the Closing Date (as
hereinafter defined) and upon the terms and subject to the conditions set forth
in this Agreement: (a) LLC1 shall sell, assign, transfer, convey and deliver all
of its Interests, free and clear of any pledges, restrictions on transfer,
proxies and voting or other agreements, liens, claims, charges, mortgages,
security interests or other legal or equitable encumbrances, limitations or
restrictions of any nature whatsoever ("Encumbrances" ), to Buyer1, and Buyer1
shall purchase and accept such Interests from LLC1; and (b) LLC2 shall sell,
assign, transfer, convey and deliver all of its Interests, free and clear of any
Encumbrances to Buyer2, and Buyer2 shall purchase and accept such Interests from
LLC2.
SECTION 1.2. Closing. The closings of such sales and purchases of the Interests
(together, the "Closing") shall take place at 10:00 A.M., one day after the
satisfaction of the conditions contained in Article V and VI (other than those
conditions that by their nature are to be fulfilled at Closing), or at such
other time and date as the parties hereto shall agree in writing (the "Closing
Date"), at the offices of ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such other place as the parties hereto shall agree
in writing. At the Closing, the Sellers shall deliver to the Buyers or their
designees a duly executed ▇▇▇▇ of sale, in form and substance reasonably
satisfactory to the Buyers and the Sellers, transferring the Interests in the
Company (the "▇▇▇▇ of Sale"). In full consideration and exchange for the
Interests, (a) Buyer1 shall thereupon pay to LLC1 one-half of the Purchase Price
as provided in Section 1.3 hereof; and (b) Buyer2 shall thereupon pay to LLC2
one-half of the Purchase Price as provided in Section 1.3 hereof. Neither Buyer1
nor Buyer2 shall have any obligation to purchase, nor LLC1 or LLC2 an obligation
to sell, any Interests unless all of the Interests are to be sold on the Closing
Date.
SECTION 1.3. Purchase Price. The aggregate purchase price for the Interests
shall be $450,000,000 as adjusted by Section 1.4 (the "Purchase Price").
SECTION 1.4. Adjustment to Purchase Price. (a) Schedule 1.4(a) contains a
statement prepared by the Sellers setting forth in reasonable detail the amount
of Working Capital of the Company as of December 31, 2001 (the "Base
Statement"). For purposes of this Agreement, "Working Capital" shall mean
Current Assets less Current Liabilities; "Current Assets" shall mean current
assets, excluding inventories, materials and supplies and prepaid amounts; and
"Current Liabilities" shall mean current liabilities, excluding the current
portion of long-term debt and any accounts payable to the Sellers or any of the
Sellers' affiliates related to the 1Line System (as defined in Section 9.14). On
the Closing Date, the Sellers shall pay to the Buyers $13,702,000, which is the
aggregate excess of the Current Liabilities over the Current Assets on the Base
Statement and is shown as a negative amount on the Base Statement ("Base
Statement Working Capital"). At least three days prior to the Closing Date, the
Sellers shall prepare and deliver to the Buyers a statement (the "Closing
Statement"), which shall set forth in reasonable detail the amount of Working
Capital of the Company as of December 31, 2001 based upon the Audited Financial
Statements (as hereinafter defined). The Base Statement shall be prepared in
accordance with RAP (as hereinafter defined) and on a basis consistent with the
2001 Financial Statements (as defined in Section 2.7(a), using the same
accounting methods, policies, practices, procedures and adjustments as were used
in the preparation of the 2001 Financial Statements. The Closing Statement shall
be prepared in accordance with RAP and on a basis consistent with the 2001
Financial Statements and the Audited Financial Statements, using the same
accounting methods, policies, practices, procedures and adjustments as were used
in the preparation of the 2001 Financial Statements and the Audited Financial
Statements.
(b) The Buyers shall have 20 days to review the Closing Statement and to inform
the Sellers in writing of any disagreement (the "Objection") which they may have
with the Closing Statement. If the Sellers do not receive the Objection within
such 20-day period, the amount of Working Capital set forth on the Closing
Statement delivered pursuant to Section 1.4(a) shall be deemed to have been
accepted by the Buyers and shall become the Final Closing Statement. If the
Buyers do timely deliver an Objection to the Sellers, the Sellers shall then
have 20 days from the date of receipt (the "Review Period") to review and
respond to the Objection. The Buyers and the Sellers shall attempt in good faith
to resolve any disagreements with respect to the determination of the Working
Capital of the Company as of December 31, 2001. If they are unable to resolve
all of their disagreements with respect to the determination of Working Capital
of the Company as of December 31, 2001, within 10 days following the expiration
of the Sellers' Review Period, they may refer, at the option of either the
Buyers or the Sellers, their differences to PriceWaterhouseCoopers, or if
PriceWaterhouseCoopers declines to accept such engagement, to an internationally
recognized firm of independent public accountants selected jointly by the Buyers
and the Sellers, who shall determine only with respect to the differences so
submitted, whether and to what extent, if any, the amount of Working Capital of
the Company as of December 31, 2001 set forth in the Closing Statement requires
adjustment. If the Buyers and the Sellers are unable to so select the
independent public accountants within five days of PriceWaterhouseCoopers
declining to accept such engagement, either the Buyers or the Sellers may
thereafter request that the American Arbitration Association make such selection
(as applicable, PriceWaterhouseCoopers, the firm selected by the Buyers and the
Sellers or the firm selected by the American Arbitration Association is referred
to as the "CPA Firm"). The Buyers and the Sellers shall direct the CPA Firm to
use its reasonable best efforts to render its determination within 30 days. The
CPA Firm's determination shall be conclusive and binding upon the Buyers and the
Sellers. The fees and disbursements of the CPA Firm shall be shared equally by
the Buyers and the Sellers. The Buyers and the Sellers shall make readily
available to the CPA Firm all relevant books and records relating to the
determination of Working Capital and all other items reasonably requested by the
CPA Firm. The Closing Statement as agreed to by the Buyers or the Sellers or as
determined by the CPA firm shall be referred to as the "Final Closing
Statement."
(c) Within three business days after the Closing Statement becomes the Final
Closing Statement, if Working Capital on the Final Closing Statement exceeds
Base Statement Working Capital, the Buyers shall pay such excess to the Sellers,
or if Base Statement Working Capital exceeds Working Capital on the Final
Closing Statement, the Sellers shall pay such excess to the Buyers. All amounts
payable under this Section 1.4(c) shall be paid within three business days of
determination of the Final Closing Statement by wire transfer of immediately
available funds to a bank account in the United States of America designated in
writing by the recipient not less than one business day before such payment.
(d) At Closing, the Sellers shall pay to the Buyers an aggregate cash amount
equal to any dividends or distributions made by the Company after December 31,
2001 and through the Closing.
(e) On the Holdback Payment Date (as defined in Section 1.4(i)), the Buyers or
the Company shall pay to the Sellers an aggregate cash amount equal to any
inter-company accounts payables and any inter-company notes payables in each
case of the Company, outstanding on the Closing Date; provided, however, that
any payables in accordance with The ▇▇▇▇▇▇▇▇ Companies, Inc. Federal and State
Tax Allocation Procedure as of May 1, 1995 or any other agreement or contractual
arrangement attributable to Federal, state or local income Taxes related to
taxable income of the Company for any period after December 31, 2001 shall be
excluded from the payment required pursuant to this Section 1.4(e).
(f) On the Holdback Payment Date, the Sellers or the Sellers' affiliates shall
pay to the Company an aggregate cash amount equal to any inter-company accounts
receivables and any inter-company notes receivables, in each case of the
Company, outstanding on the Closing Date.
(g) Prior to the Closing Date, the Sellers shall pay to the Company an amount
equal to any amounts paid by the Company to the Sellers or any of the Sellers'
affiliates after December 31, 2001 and prior to the Closing Date for the
accounts payable to the Sellers or any of the Sellers' affiliates related to the
1Line System reflected in the Audited Financial Statements and any remaining
payable to the Sellers or any of the Sellers' affiliates related to the 1Line
System shall be cancelled. The Sellers shall separately pay to the Buyers any
amounts paid by the Company prior to December 31, 2001 for the 1Line System.
(h) The Sellers shall pay to the Buyers at Closing $11.5 million which
represents $6 million for the portion of the January capital expenditures for
the 2003 Expansion Project agreed to be reimbursed and $5.5 million for certain
payments pursuant to the Workforce Agreement, as defined in Section 5.15.
(i) (A) If the Expansion Certificate (as defined below) has not been
issued by FERC on or prior to the 30th day after the Closing Date,
then on the next business day following such 30th day (the "Holdback
Payment Date") (i) LLC1 shall pay to Buyer1 an amount of cash equal to
one-half of the Holdback Amount, and (ii) LLC2 shall pay to Buyer2 an
amount of cash equal to one-half of the Holdback Amount. All amounts
payable under this Section 1.4(i)(A) shall be paid by wire transfer of
immediately available funds to a bank account in the United States of
America designated in writing by Buyers not less than one business day
before such payment. For purposes of this Agreement "Holdback Amount"
shall mean $32,500,000.
(B) If LLC1 and LLC2 are required to make a payment pursuant to
Section 1.4(i)(A) then, within three business days of the issuance by
FERC of the Expansion Certificate, (i) Buyer1 shall pay LLC1 an amount
of cash equal to one-half of the Adjusted Holdback Amount (as defined
below), plus interest accruing on such Adjusted Holdback Amount at
LIBOR from the Holdback Payment Date up and through the date Buyer1
makes such payment and (i) Buyer2 shall pay to LLC2 an amount of cash
equal to one-half of the Adjusted Holdback Amount, plus interest
accruing on such Adjusted Holdback Amount at LIBOR from the Holdback
Payment Date up and through the date Buyer2 makes such payment. The
interest referred to in this paragraph is a per annum interest rate
and shall be computed on the basis of a 360-day year consisting of
twelve 30-day months. All amounts payable under this Section 1.4(i)(B)
shall be paid by wire transfer of immediately available funds to a
bank account in the United States of America designated in writing by
the Sellers not less than one business day before such payment. For
purposes of clarity, if the Expansion Certificate is issued by FERC on
or after February 1, 2003 then Buyer1 and Buyer2 shall not be
obligated to make any payment under this Section 1.4(i)(B).
(C) For purposes of this Section 1.4(i), the following terms shall
have the following meanings:
"Adjusted Holdback Amount" shall mean (i) $32,500,000 if the
Expansion Certificate is issued by FERC prior to August 1, 2002, (ii)
$27,625,000 if the Expansion Certificate is issued by FERC on or after August 1,
2002 and prior to September 1, 2002, (iii) $22,750,000 if the Expansion
Certificate is issued by FERC on or after September 1, 2002 and prior to October
1, 2002, (iv) $17,875,000 if the Expansion Certificate is issued by FERC on or
after October 1, 2002 and prior to November 1, 2002, (v) $13,000,000 if the
Expansion Certificate is issued by FERC on or after November 1, 2002 and prior
to December 1, 2002, (vi) $8,125,000 if the Expansion Certificate is issued by
FERC on or after December 1, 2002 and prior to January 1, 2003, (vii) $3,250,000
if the Expansion Certificate is issued by FERC on or after January 1, 2003 and
prior to February 1, 2003, and (viii) $0 if the Expansion Certificate is issued
by FERC on or after February 1, 2003.
"Expansion Certificate" shall mean a certificate of public
necessity and convenience in the Matter of Kern River Gas Transmission Company,
Docket No. CP01-422, authorizing the Company to construct and operate the
additional facilities needed to expand its transportation capacity as described
in the Application for Certificate of Public Convenience and Necessity filed by
the Company in such proceeding and provided that such certificate does not
contain any terms or conditions that would materially adversely affect the
ability of the Company to construct, own and operate the expansion facilities as
contemplated by the parties as of the date of this Agreement.
"LIBOR" shall mean the average 30-day daily closing London
Interbank Offered Rate in effect on the dates between the Holdback Payment Date
and the date the Adjusted Holdback Amount is paid. (j) The Buyers will have the
right to dispute all amounts calculated by the Sellers in Sections 1.4(d),
1.4(e), 1.4(f) and 1.4(g) (other than such amounts which were outstanding on
December 31, 2001) using similar dispute resolution provisions described in
Section 1.4(b).
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers hereby jointly and severally represent and warrant
as follows:
SECTION 2.1. Corporate Organization. The Company is a general partnership duly
organized and validly existing under the laws of Texas. Each of the Sellers is
duly formed, validly existing and in good standing under the laws of its
jurisdiction of formation. The Company and each of its Subsidiaries (as defined
below) have all requisite power and authority and all governmental licenses,
authorizations, permits, consents and approvals to own their respective
properties and assets and to conduct their businesses as now conducted, except
for immaterial failures to have such licenses, authorizations, permits, consents
and approvals. The Company and each of its Subsidiaries are duly qualified to do
business as a foreign entity and are in good standing in every jurisdiction
where the character of the properties owned or leased by them or the nature of
the business conducted by them makes such qualification necessary, except where
the failure to be so qualified or in good standing would not individually or in
the aggregate have a Material Adverse Effect (as defined in Section 9.14).
Schedule 2.1 sets forth all of the jurisdictions in which the Company and its
Subsidiaries are qualified to do business. Copies of the Organizational
Documents of the Company and each of its Subsidiaries with all amendments
thereto to the date hereof, have been furnished by the Sellers to the Buyers or
their representatives, and such copies are accurate and complete as of the date
hereof. "Organizational Documents" shall mean certificates of incorporation,
by-laws, certificates of formation, limited liability company operating
agreements, partnership or limited partnership agreements or other formation or
governing documents of a particular entity.
SECTION 2.2. Capitalization; Title. All of the outstanding partnership interests
of the Company are owned of record and beneficially by LLC1 and LLC2. All of the
outstanding limited liability company interests of each of LLC1 and LLC2 are
owned of record and beneficially by a wholly-owned subsidiary of the Seller
Parent. All of the Interests have been duly authorized and validly issued.
Except for this Agreement and as set forth on Schedule 2.2, there are no
outstanding options, warrants, agreements, conversion rights, preemptive rights
or other rights to subscribe for, purchase or otherwise acquire the Interests.
There are no voting trusts or other agreements or understandings to which any of
the Sellers or the Company is a party with respect to the voting of the
Interests. There is no indebtedness of the Company having general voting rights
issued and outstanding. Except for this Agreement, there are no outstanding
obligations of any person to repurchase, redeem or otherwise acquire outstanding
Interests or any securities convertible into or exchangeable for any Interests.
LLC1 and LLC2 have valid and marketable title to the Interests and the sale and
transfer of the Interests by LLC1 and LLC2 to Buyer1 and Buyer2 hereunder will
transfer title to the Interests to such buyers free and clear of any
Encumbrances.
SECTION 2.3. Subsidiaries and Equity Interests. The Company has no Subsidiaries
except Kern River Funding Corp. and does not own, directly or indirectly, any
shares of capital stock, voting rights or other equity interests or investments
in any other person. "Subsidiary" shall mean, with respect to the Company, any
person of which (a) at least a majority of the securities or other interests
having by their terms ordinary voting power to elect a majority of the Board of
Directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by the Company or by any one or more of its other Subsidiaries or (b) the
Company or any other Subsidiary is a general partner (excluding any such
partnership where the Company or any Subsidiary of such party does not have a
majority of the voting interest in such partnership). The Company or any
Subsidiary does not have any rights to acquire by any means, directly or
indirectly, any capital stock, voting rights, equity interests or investments in
another person.
SECTION 2.4. Validity of Agreement; Authorization. The Sellers have the power to
enter into this Agreement and to carry out their obligations hereunder. The
execution and delivery of this Agreement and the performance of their
obligations hereunder have been duly authorized by the Management Committees of
LLC1, LLC2 and Holdco and the Board of Directors of Seller Parent, and no other
proceedings on the part of the Sellers are necessary to authorize such
execution, delivery and performance. This Agreement has been duly executed by
the Sellers and constitutes the Sellers' valid and binding obligation
enforceable against the Sellers in accordance with its terms (except to the
extent that its enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or other similar law affecting the enforcement of
creditors' rights generally or by general equitable principles).
SECTION 2.5. No Conflict or Violation. Except as set forth on Schedule 2.5, the
execution, delivery and performance by the Sellers of this Agreement does not
and will not: (a) violate or conflict with any provision of the Organizational
Documents of the Sellers; (b) materially violate any applicable provision of a
material law, statute, judgment, order, writ, injunction, decree, award, rule,
or regulation of any foreign, federal, tribal, state or local government, court,
arbitrator, agency or commission or other governmental or regulatory body or
authority ("Governmental Authority"); (c) materially violate, result in a
material breach of, constitute (with due notice or lapse of time or both) a
material default or cause any material obligation, penalty or premium to arise
or accrue under any material contract, lease, loan agreement, mortgage, security
agreement, trust indenture or other material agreement or instrument to which
the Sellers, the Company, or any of its Subsidiaries are a party or by which any
of them is bound or to which any of their respective properties or assets is
subject; or (d) result in the creation or imposition of any Encumbrance except
Permitted Encumbrances upon any of the properties or assets of the Company or
any of its Subsidiaries.
SECTION 2.6. Consents and Approvals. Except as set forth on Schedule 2.6, no
material consent, approval or authorization of, or filing, registration or
qualification with, any Governmental Authority, or any other person (on the part
of the Sellers or the Company), is required as a condition to the execution and
delivery of this Agreement by the Sellers or the performance of the Sellers'
obligations hereunder.
SECTION 2.7. Financial Statements. (a) The Sellers have heretofore furnished to
the Buyers copies of the unaudited balance sheet of the Company as of December
31, 2001, together with the related statements of income, partners' equity and
cash flow for the period then ended and the notes thereto ("2001 Financial
Statements" or the "Financial Statements"). Except as set forth on Schedule
2.7(a), the 2001 Financial Statements, including the notes thereto: (i) were
prepared in accordance with the accounting principles ("RAP") prescribed or
permitted by the Federal Energy Regulatory Commission ("FERC") applied on a
consistent basis with the audited balance sheet of the Company as of December
31, 2000, together with the related statements of income, partners' equity and
cash flow for the period then ended and the notes thereto ("2000 Audited
Financial Statements"); (ii) present fairly in all material respects the
consolidated financial position, results of operations and changes in cash flow
of the Company as of such date and for the period then ended (subject to normal
year-end audit adjustments consistent with prior periods); and (iii) are
complete and correct in all material respects, and have been prepared based upon
the books of account and records of the Company.
(b) The Audited Financial Statements, including the notes thereto: (i) will be
prepared in accordance with RAP applied on a consistent basis with the 2000
Audited Financial Statements; (ii) will present fairly in all material respects
the consolidated financial position, results of operations and changes in cash
flow of the Company as of such date and for the period then ended; and (iii)
will be complete and correct in all material respects, and will be prepared
based upon the books of account and records of the Company.
SECTION 2.8. Absence of Certain Changes or Events. Except as set forth in
Schedule 2.8, since December 31, 2001, the business of the Company and its
Subsidiaries has been conducted in the ordinary course consistent with past
practices and neither the Company nor any of its Subsidiaries has taken any of
the actions described in Section 4.1(a)(i) through (xviii), except in connection
with entering into this Agreement. Since December 31, 2001 there has not been:
(a) Destruction of, damage to, or loss of, any material asset of the Company or
any Subsidiary (whether or not covered by insurance);
(b) Any material citation received, or to the Sellers' knowledge, any other
citation received by the Company, the Sellers or any Subsidiary for any
violations of any act, law, rule, regulation, or code of any Governmental
Authority related to the activities or business of the Company or any of its
Subsidiaries; or
(c) Other event or condition of any character that has had, or would reasonably
be expected to have, a Material Adverse Effect.
SECTION 2.9. Tax Matters. (a) For purposes of this Agreement, "Tax Returns"
shall mean returns, reports, exhibits, schedules, information statements and
other documentation (including any additional or supporting material) filed or
maintained, or required to be filed or maintained, in connection with the
calculation, determination, assessment or collection of any Tax and shall
include any amended returns required as a result of examination adjustments made
by the Internal Revenue Service or other Tax authority. For purposes of this
Agreement, "Tax" or "Taxes" shall mean any and all Federal, state, local,
foreign and other taxes, levies, fees, imposts, duties and charges of whatever
kind (including any interest, penalties or additions to the tax imposed in
connection therewith or with respect thereto), including, without limitation,
taxes imposed on, or measured by, income, franchise, profits or gross receipts,
and also ad valorem, value added, sales, use, service, real or personal
property, capital stock, license, payroll, withholding, employment, social
security, workers' compensation, unemployment compensation, utility, severance,
production, excise, stamp, occupation, premium, windfall profits, transfer and
gains taxes and customs duties.
(b) Except as disclosed on Schedule 2.9, (i) the Company has filed (or joined in
the filing of) when due all Tax Returns required by applicable law to be filed
with respect to the Company; (ii) all such Tax Returns were true, correct and
complete in all material respects as of the time of such filing; (iii) all Taxes
relating to periods ending on or before the Closing Date owed by the Company
(whether or not shown on any Tax Return) at any time on or prior to the Closing
Date, if required to have been paid, have been paid (except for Taxes which are
being contested in good faith in appropriate proceedings); (iv) any liability of
the Company for Taxes not yet due and payable, or which are being contested in
good faith in appropriate proceedings, has been provided for on the financial
statements of the Company in accordance with RAP; (v) there is no action, suit,
proceeding, investigation, audit or claim now pending against, or with respect
to, the Company in respect of any material Tax or material Tax assessment, nor
is any claim for additional material Tax or material assessment asserted by any
Tax authority; (vi) since January 1, 1998, no written claim has been made by any
Tax authority in a jurisdiction where the Company (or the Sellers with respect
to the Company) does not currently file a Tax Return that it is or may be
subject to Tax by such jurisdiction, nor to the Sellers' knowledge is any such
assertion threatened in writing; (vii) the Company has no outstanding request
for any extension of time within which to pay its Taxes or file its Tax Returns;
(viii) there has been no waiver or extension of any applicable statute of
limitations for the assessment or collection of any Taxes of the Company; (ix)
each of LLC1, LLC2 and the Company have been disregarded entities for Federal
income tax purposes for all taxable periods beginning January 1, 2001 through
and including the Closing Date; (x) Seller Parent is not a "foreign person"
within the meaning of Section 1445 of the United States Internal Revenue Code of
1986, as amended (the "Code"); (xi) the Company is not a party to any agreement,
whether written or unwritten, providing for the payment of Taxes, payment for
Tax losses, entitlements to refunds or similar Tax matters; (xii) the Company
has withheld and paid all material Taxes required to be withheld by the Company
in connection with any amounts paid or owing to any employee, creditor,
independent contractor or other third party.
SECTION 2.10. Absence of Undisclosed Liabilities. Except as disclosed on
Schedule 2.10, the Company and its Subsidiaries have no material, individually
or in the aggregate, indebtedness or liability, absolute or contingent, direct
or indirect, which is not shown or provided for on the consolidated balance
sheets of the Company included in the 2001 Financial Statements other than
liabilities incurred or accrued in the ordinary course of business (including
liens of current taxes and assessments not in default) since December 31, 2001.
SECTION 2.11. Real and Personal Property; Sufficiency of Assets of the Company.
(a) (i) Except as set forth on Schedule 2.11(a), the Company or one of its
Subsidiaries owns marketable fee title to, or holds a valid leasehold, interest
in or right-of-way easement (collectively, the "Rights of Way") through, all
real property ("Real Property") used or necessary for the conduct of the
Company's and its Subsidiaries' business as it is presently conducted and as the
Company's and its Subsidiaries' business is proposed to be conducted in
connection with the 2002 Expansion Project, including, without limitation, all
real property required for the construction, operation and maintenance of the
Pipeline and have good and valid title to all of the material tangible assets
and properties which they own and which are reflected on the 2001 Financial
Statements (except for assets and properties sold, consumed or otherwise
disposed of in the ordinary course of business since the date of the 2001
Financial Statements), (ii) Schedule 2.11(a) sets forth a summary of types of
the Rights of Way obtained or to be obtained for the High Desert Project and the
2003 Expansion Project, and (iii) all such Real Property, assets and properties
(other than Rights of Way) are owned or leased free and clear of all
Encumbrances, except for (A) Encumbrances set forth on Schedule 2.11(a), (B)
liens for current Taxes not yet due and payable or for Taxes the validity of
which is being contested in good faith, (C) Encumbrances to secure indebtedness
reflected on the 2001 Financial Statements, (D) Encumbrances which will be
discharged on or prior to the Closing Date, (E) Rights of Way, written
agreements, laws, ordinances and regulations affecting building use and
occupancy or reservations of interest in title (collectively, "Property
Restrictions") imposed or promulgated by law or any Governmental Authority with
respect to Real Property, including zoning regulations, provided they do not
materially adversely affect the current use of the applicable Real Property or
the use proposed in connection with the Expansion Projects, (F) mechanics',
carriers', workmen's and repairmen's liens and other Encumbrances, Property
Restrictions and other limitations of any kind, if any, which do not materially
detract from the value of or materially interfere with the present use or the
use proposed in connection with the Expansion Projects of any Real Property
subject thereto or affected thereby and which have arisen or been incurred in
the ordinary course of business and (G) Encumbrances that do not materially
detract from the value or materially interfere with the present use of the asset
subject thereto or the proposed use of the asset in connection with the
Expansion Projects (clauses (A) through (G) above referred to collectively as
"Permitted Encumbrances"). Schedule 2.11(a) sets forth a list of all Real
Property which the Company or one of its Subsidiaries owns in fee (such Real
Property, "Fee Property") and all Rights of Way owned by the Company or one of
its Subsidiaries. Except as set forth in Schedule 2.11(a), to the Company's
knowledge its interests in (1) the Fee Property are exclusive, indefeasible and
perpetual and (2) all Rights of Way are perpetual.
(b) There are no material structural defects relating to any of the improvements
to the Real Property and all tangible assets and property owned or used by the
Company or any of its Subsidiaries are in good operating condition, ordinary
wear and tear excepted. To the Company's knowledge, all improvements to the real
property owned or used by the Company or any of its Subsidiaries do not encroach
in any respect on property of others (other than encroachments that would not
materially impair the operations of the Company and its Subsidiaries).
(c) Except as set forth on Schedule 2.11(c), and except for Intellectual
Property, the assets owned or licensed by the Company and its Subsidiaries
constitute all of the assets, properties and rights customarily used by the
Sellers, the Sellers' affiliates, the Company and the Subsidiaries to conduct
the business of the Company and its Subsidiaries and the operation of its
Pipeline as currently conducted.
(d) The Company has good and valid title to at least a 63.6% tenancy-in-common
interest in the assets comprising a certain jointly owned segment of the
Pipeline in California (the "Common Facilities") extending from Daggett,
California to Bakersfield, California and the real estate associated therewith.
After completion of the 2003 Expansion Project and pursuant to the Construction
Operation and Maintenance Agreement (the "COM") by and among the Company, Mojave
Pipeline Company and Mojave Pipeline Operation Company, dated August 29, 1989,
as amended November 30, 1990, November 1, 1993, May 30, 1995, March 27, 1996,
November 27, 1996 and March 29, 1999, the Company will (i) have good and valid
title to a greater percentage interest in such Common Facilities than its
current percentage which percentage interest will be determined upon final
determination of the 2003 Expansion capital costs, (ii) be entitled to the
exclusive use of the incremental Theoretical Capacity (as defined in the COM)
resulting from the construction of the 2003 Expansion Project and (iii) be
entitled to all revenues arising from the provision of transportation services
associated with its marketing of such expanded capacity.
(e) Except as set forth on Schedule 2.11(e), there is no pending or, to the
Sellers' knowledge, threatened condemnation of any part of the Real Property by
any Governmental Authority which would materially adversely affect the Company's
(or its Subsidiaries') current use of the applicable Real Property.
(f) With respect to those assets assigned to the Company or the Buyers pursuant
to Section 4.19, the Sellers and the Sellers' affiliates own all right, title
and interest in and to, or have valid and enforceable right to use all equipment
(including, without limitation, computer hardware, servers, routers and PBX
equipment) set forth on Schedule 2.11(c), free and clear of all material
Encumbrances (other than Permitted Encumbrances), and (ii) all such equipment is
in good operating condition, ordinary wear and tear excepted.
SECTION 2.12. Regulatory Matters. The Company is a "Natural Gas Company" as that
term is defined in Section 2 of the Natural Gas Act ("NGA"). The Company is not
a "public utility company," "holding company" or "subsidiary" or "affiliate" of
a holding company as such terms are defined in the Public Utility Holding
Company Act of 1935 (the "1935 Act"). The Company is in material compliance with
all provisions of the NGA and all rules and regulations promulgated by FERC
pursuant thereto. The Company is in material compliance with all orders issued
by FERC that pertain to all terms and conditions and rates charged for services.
No approval of (i) the Securities and Exchange Commission under the 1935 Act or
(ii) FERC under the NGA or the Federal Power Act is required in connection with
the execution of this Agreement by the Sellers or the transaction contemplated
hereby with respect to the Sellers.
SECTION 2.13. Intellectual Property. (a) Except as set forth on Schedule
2.13(a), the Company or its Subsidiaries own all right, title and interest in
and to, or have a valid license (enforceable by the Company or its Subsidiaries
in accordance with its terms (except to the extent that its enforceability may
be limited by applicable bankruptcy, insolvency, reorganization or other similar
law affecting the enforcement of creditors' rights generally or by general
equitable principles)) or other rights to use (other than through the Sellers or
their affiliates), all the material Intellectual Property used by the Company,
its Subsidiaries, the Sellers or the Sellers' affiliates in connection with the
Company's business, which Intellectual Property represents all material
intellectual property rights (i) used by the Company, its Subsidiaries, the
Sellers or the Sellers' affiliates to conduct the business of the Company and
its Subsidiaries and the operation of its Pipeline as currently conducted or
(ii) owned or licensed by the Company, its Subsidiaries, the Sellers or the
Sellers' affiliates and intended to be used in connection with the Expansion
Projects. All Intellectual Property owned by the Company and its Subsidiaries is
owned free and clear of material Encumbrances other than Permitted Encumbrances.
The Company and its Subsidiaries are in compliance in all material respects with
their contractual obligations relating to the protection of such of the
Intellectual Property they use pursuant to material licenses or other material
agreements. To the Sellers' knowledge, there are no material conflicts with or
infringements of any material Intellectual Property owned by the Company or its
Subsidiaries by any third party. To the Sellers' and the Sellers' affiliates'
knowledge, the conduct of the business of the Company and its Subsidiaries as
conducted does not conflict with or infringe any intellectual property or other
proprietary right of any third party. Neither (a) the Intellectual Property
owned by the Company nor (b) the Licensed Software, as of the date of delivery,
infringes any intellectual property or other proprietary rights of any third
party. There is no claim (in writing), suit, action or proceeding pending or, to
the knowledge of the Sellers or the Sellers' affiliates or the Company or its
Subsidiaries, threatened against the Company or its Subsidiaries: (i) alleging
any conflict or infringement with any third party's intellectual property or
other proprietary rights; or (ii) challenging the Company's or any Subsidiary's
ownership or use of, or the validity or enforceability of, any material
Intellectual Property. The consummation of the transactions contemplated hereby
will not alter or impair any material Intellectual Property. As used herein,
"Intellectual Property" shall mean all of the following, to the extent owned or
used by the Company or its Subsidiaries in the business of the Company or its
Subsidiaries as of the Closing Date: (i) trademarks and service marks, logos,
trade dress, product configurations, trade names and other indications of
origin, applications or registrations in any jurisdiction pertaining to the
foregoing and all goodwill associated therewith; (ii) inventions (whether or not
patentable), discoveries, improvements, ideas, know-how, formula, methodology,
research and development, business methods, processes, technology, and patent
applications or patents in any jurisdiction pertaining to the foregoing,
including re-issues, continuations, divisions, continuations-in-part, renewals
or extensions; (iii) trade secrets, including confidential information and the
Company's and its Subsidiaries' right in any jurisdiction to limit the use or
disclosure thereof; (iv) copyrights in writings, designs, software (including
password unprotected interpretive code or source code, object code, development
documentation, programming tools, drawings, specifications and data), mask works
or other works and applications or registrations in any jurisdiction for the
foregoing; (v) database rights; and (vi) Internet Web sites, Web pages, domain
names and applications and registrations pertaining thereto and all items in
clauses (i) - (v) above to the extent used in connection with or contained in
all versions of the Company's or any Subsidiary's Web sites.
(b) Schedule 2.13(b) sets forth a complete and current list of all copyright and
trademark applications and registrations and patent applications and issued
patents and material unregistered trademarks and copyrights owned by the Company
or its Subsidiaries ("Listed Intellectual Property"). All Listed Intellectual
Property is valid, subsisting, unexpired and all renewal fees and other
maintenance fees that have fallen due on or prior to the date of this Agreement
have been paid. Except as listed in Schedule 2.13(b), no Listed Intellectual
Property is the subject of any proceeding before any governmental, registration
or other authority in any jurisdiction, including any office action or other
form of preliminary or final refusal of registration.
(c) Schedule 2.13(c) sets forth a complete list of all material agreements
relating to the Intellectual Property or to the right of the Company or any of
its Subsidiaries to use the proprietary rights of any third party excluding
"shrink-wrap" and "off-the-shelf" software and any agreement, in each case, with
a replacement cost of less than $500. Each agreement set forth on Schedule
2.13(c) is valid, binding and enforceable by the Company or its Subsidiaries
(except to the extent that its enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or other similar law affecting the
enforcement of creditors' rights generally or by general equitable principles)
in accordance with its terms on the date of this Agreement. The Company and each
Subsidiary, as the case may be, have performed all material obligations required
to be performed by them under, and are not in material default or breach of, any
agreement set forth in Schedule 2.13(c), and no event has occurred, which with
due notice or lapse of time or both, would constitute such a material default by
the Company or its Subsidiaries. To the knowledge of the Sellers and the
Company, (1) no other party to any agreement set forth in Schedule 2.13(c) is in
material default thereof, and (2) no event has occurred which, with due notice
or lapse of time or both, would constitute such a material default by such other
party.
(d) To the extent a representation or warranty is set forth in this Section 2.13
and the same subject matter is covered in another representation or warranty in
this Agreement (other than with respect to the representation regarding Licensed
Software in Section 4.22), the provisions concerning such subject matter in this
Section 2.13 shall govern.
(e) To the Sellers' knowledge, the Company and its Subsidiaries each take
reasonable measures to protect the confidentiality of their trade secrets. To
the Sellers' knowledge, (i) none of the material Intellectual Property has been
used, disclosed or appropriated to the detriment of the Company or any of its
Subsidiaries for the benefit of any third party; and (ii) no employee,
independent contractor or agent of the Company or any Subsidiaries has
misappropriated any material trade secrets or other material confidential
information of any third party in the course of the performance of his or her
duties as an employee, independent contractor or agent of the Company or any of
its Subsidiaries.
(f) With respect to intellectual property assets to be assigned to the Company
or the Buyers from the Sellers or Seller's affiliates pursuant to Section 4.19
(the "Assigned Assets"):
(i) The Sellers and the Sellers' affiliates are in compliance in all material
respects with their material contractual obligations. To the Sellers' knowledge,
there are no material conflicts with or infringements by any third party of any
Assigned Assets owned by the Sellers or the Sellers' affiliates. The Assigned
Assets owned by the Sellers and the Sellers' affiliates do not infringe any
intellectual property or other proprietary rights of any third party;
(ii) There is no claim (in writing), suit, action or proceeding pending or, to
the knowledge of the Sellers or the Sellers' affiliates, threatened against
Sellers or the Sellers' affiliates challenging the Sellers' or the Sellers'
affiliates' ownership or use of, or the validity or enforceability of, any
Assigned Assets; and
(iii) Neither the Sellers nor any of their affiliates will be, as a result of
the execution and delivery of this Agreement or the performance of their
obligations under this Agreement, in breach of any agreement set forth in
Schedule 2.13(a). Each Assigned Asset that is a license or other agreement is
valid, binding and enforceable against the parties thereto in accordance with
its terms (except to the extent its enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or other similar law affecting the
enforcement of creditors' rights generally or by general equitable principles).
The Sellers and the Sellers' affiliates, as the case may be, have performed all
material obligations to be performed by them under, and are not in material
default or breach of any Assigned Asset that is a license or an agreement and no
event has occurred, which with due notice or lapse of time or both, would
constitute such a material default by the Sellers or the Sellers' affiliates. To
the knowledge of the Sellers and the Sellers' affiliates, no other party to any
Assigned Asset is in material default thereof, and no event has occurred which,
with due notice or lapse of time or both, would constitute such a material
default by such other party.
SECTION 2.14. Licenses, Permits and Governmental Approvals. (a) Schedule 2.14(a)
sets forth a true and complete list of all material licenses, permits,
certificates, franchises, authorizations and approvals issued or granted to the
Company and any Subsidiary by any Governmental Authority (including the date
issued or applied for and the dates of any amendments thereto) (each a "License"
and, collectively, the "Licenses") necessary for the conduct of its business
presently and as proposed to be conducted in connection with the Expansion
Projects. Schedule 2.14(a) also sets forth a true and complete list of all
pending applications for Licenses necessary for the conduct of the Company's
business as proposed to be conducted in connection with the Expansion Projects.
Each License (other than Licenses proposed to be obtained in connection with the
Expansion Projects) has been issued to, and duly obtained and fully paid for by,
the holder thereof and is valid, in full force and effect, and not subject to
any pending or known threatened administrative or judicial proceeding to
suspend, revoke, cancel or declare such License invalid in any respect.
(b) In the case of Licenses that have been applied for but not yet granted, all
necessary applications have been made in a timely fashion and the Company has no
knowledge as to why any License that has been applied for but not yet granted
(as indicated on Schedule 2.14(a)), will not be obtained without undue burden
and in form and substance to permit the continued lawful conduct of the
Company's business during construction of the Expansion Projects and in
connection with the operation of the Expansion Projects. No License will in any
way be cancelled or suspended or required to be modified (other than in a
ministerial manner) as a result of, or terminate or lapse by reason of, the
execution, delivery and performance of this Agreement by the Sellers.
SECTION 2.15. Compliance with Law. Except as relates to Tax matters (which are
provided for in Section 2.9), regulatory matters (which are provided for in
Section 2.12), or environmental, health and safety matters (which are provided
for in Section 2.24) and except as set forth on Schedule 2.15, the operations of
the Company and each Subsidiary have been conducted in material compliance since
January 1, 2000 with all applicable material laws, licenses, regulations, orders
and other material requirements of all Governmental Authorities having
jurisdiction over the Company and any Subsidiary and their assets, properties
and operations. Except as relates to Tax matters (which are provided for in
Section 2.9), regulatory matters (which are provided for in Section 2.12) or
environmental, health and safety matters (which are provided for in Section
2.24), neither the Sellers, nor the Company or any Subsidiary have received
written notice of any material violation of any such law, license, regulation,
order or other legal requirement, or are in material default with respect to any
material order, writ, judgment, award, injunction or decree of any Governmental
Authority, applicable to the Company, the Subsidiaries or any of their assets,
properties or operations. Neither the Sellers, nor the Company or any Subsidiary
have knowledge of any proposed change in any such laws, rules or regulations
(other than laws of general applicability) or the terms of any such license that
would materially adversely affect the transactions contemplated by this
Agreement or materially adversely affect all or a substantial part of the assets
or the businesses of the Company and the Subsidiaries, individually or in the
aggregate, or the Expansion Projects.
SECTION 2.16. Litigation. Except as set forth on Schedule 2.16, as of the date
hereof, there are no Legal Proceedings pending or, to the knowledge of the
Sellers or the Company and its Subsidiaries, threatened against or involving any
Seller, the Company or any Subsidiary that, individually or in the aggregate,
are reasonably likely to (a) have a Material Adverse Effect or (b) materially
impair or delay the ability of the Sellers to perform their obligations under
this Agreement or consummate the transactions contemplated by this Agreement.
Except as set forth on Schedule 2.16, as of the date hereof, there is no order,
judgment, injunction or decree of any Governmental Authority outstanding against
any Seller, the Company or any Subsidiary that, individually or in the
aggregate, would have any effect referred to in the foregoing clauses (a) and
(b). "Legal Proceeding" shall mean any judicial, administrative or arbitral
actions, suits, proceedings (public or private), investigations or governmental
proceedings before any Governmental Authority.
SECTION 2.17. Contracts. Except for Commitments (as defined below) listed on
Schedule 2.13 or Schedule 2.20, Schedule 2.17 sets forth (subject to the dollar
amount limitations of clauses (b) or (c) below) a true and complete list of the
following contracts, agreements, instruments and commitments to which the
Company or any Subsidiary is a party or otherwise relating to or affecting any
of their assets, properties or operations whether written or oral: (a) other
than those that are immaterial, any contracts, agreements and commitments not
made in the ordinary course of business; (b) contracts calling for payments by
the Company of amounts greater than $200,000; (c) contracts, loan agreements,
letters of credit, repurchase agreements, mortgages, security agreements,
guarantees, pledge agreements, trust indentures and promissory notes and similar
documents relating to the borrowing of money or for lines of credit in any case
for amounts in excess of $200,000; (d) agreements with respect to the sharing or
allocation of taxes or tax costs; (e) agreements for the sale of any material
assets, property or rights other than in the ordinary course of business or for
the grant of any options or preferential rights to purchase any material assets,
property or rights; (f) documents granting any power of attorney with respect to
the material affairs of the Company or any Subsidiary; (g) suretyship contracts,
performance bonds, working capital maintenance, support agreements, contingent
obligation agreements or other forms of guaranty agreements; (h) other than
those that are immaterial, any contracts or commitments limiting or restraining
the Company or any Subsidiary from engaging or competing in any lines of
business or with any person; (i) other than those that are immaterial,
partnership or joint venture agreements; (j) shareholder agreements or
agreements relating to the issuance of any securities of the Company or any
Subsidiary or the granting of any registrations rights with respect thereto; and
(k) all amendments, modifications, extensions or renewals of any of the
foregoing (the foregoing contracts, agreements and documents are hereinafter
referred to collectively as the "Commitments" and individually as a
"Commitment"). Each Commitment is valid, binding and enforceable against the
parties thereto in accordance with its terms, and in full force and effect on
the date hereof. The Company and each Subsidiary, as the case may be, have
performed in all material respects all obligations required to be performed by
them under, and are not in material default or breach of in respect of, any
Commitment, and no event has occurred which, with due notice or lapse of time or
both, would constitute such a default. To the knowledge of the Sellers and the
Company or any of its Subsidiaries, no other party to any Commitment is in
default in any material respect thereof, and no event has occurred which, with
due notice or lapse of time or both, would constitute such a default. The
Sellers have made available to the Buyers or their representatives true and
complete originals or copies of all the Commitments and a copy of every material
default notice received by the Sellers or the Company or any of its Subsidiaries
during the past one year with respect to any of the Commitments.
SECTION 2.18. Books and Records of the Company. The books of account, minute
books, record books, and other records of the Company and each Subsidiary, all
of which have been made available to the Buyers or their representatives, are
complete and correct in all material respects.
SECTION 2.19. Expansion Projects. (a) The capital expenditures set forth on
Schedule 2.19(a) hereto are reasonably expected to be sufficient to maintain the
Company's existing facilities in good working order through December 31, 2002.
(b) The Construction Budgets and Schedules of the respective Expansion Projects
are attached hereto as Schedule 2.19(b) and have been prepared by the Company in
good faith and based upon assumptions that are believed to be reasonable, and
the Sellers have no knowledge of any fact or circumstance that will or is
reasonably likely to cause the Expansion Projects not to be completed in
accordance with such Construction Budgets and Schedules.
SECTION 2.20. Employee Plans. (a) The Company does not sponsor or maintain, and
at any time during the past five years has not sponsored or maintained, any
"employee benefit plan," as defined under Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or any other
bonus, pension, stock option, stock purchase, benefit, welfare, profit-sharing,
retirement, disability, vacation, severance, hospitalization, insurance,
incentive, deferred compensation and other similar fringe or employee benefit
plans, funds, programs or arrangements, whether written or oral ("Employee
Plans" ), in each of the foregoing cases which cover, are maintained for the
benefit of, or relate to any or all current or former employees of the Company.
As of the Closing Date, the Company will have no obligation or liability under
any Employee Plans. Schedule 2.20(a) sets forth a true and complete list of all
Employee Plans which cover, are maintained for the benefit of, or relate to any
or all employees of the Sellers who are assigned to the business of the Company
(the "Business Employees," and such Employee Plans hereinafter referred to as
the "Seller Plans").
(b) The Company has no current employees, and no present or contingent liability
to any former employees. Schedule 2.20(b) sets forth a true and complete list
showing the names of all Business Employees. There are no contracts, agreements,
plans or arrangements covering any Business Employee with "change of control" or
similar provisions that would be triggered as a result of the consummation of
this Agreement or the Stock Purchase Agreement dated of even date herewith
between Seller Parent and Buyer Parent or that could otherwise result in
liability to the Company. To the Sellers' and the Company's knowledge, no
Business Employee is obligated under any contract (including licenses, covenants
or commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere with
the use of such employee's efforts to promote the interests of the Company or
the Buyers or that would conflict with the Company's business as conducted or
proposed to be conducted. Except for those employees who are eligible for early
retirement benefits, neither the Sellers nor the Company have received notice
from any officer of the Company or its Subsidiaries or key Business Employee or
group of Business Employees, that such person(s) intends to terminate their
employment.
SECTION 2.21. Existing Firm Transportation Customers; Expansion Customers. (a)
Schedule 2.21(a) sets forth a complete and correct list of existing firm
transportation customers of the Pipeline during the last fiscal year ("Firm
Transportation Customers") and the amount of business done with each Firm
Transportation Customer in such year. As of the date of this Agreement, except
as set forth on Schedule 2.21(a), (i) the Company is not engaged in any material
dispute with any Firm Transportation Customer; (ii) there has been no material
adverse change in the business relationship of the Company with any Firm
Transportation Customer since January 1, 2001; and (iii) no Firm Transportation
Customer has proposed in writing any material adverse modification or change in
the business relationship with the Company. Except as disclosed on Schedule
2.21(a), since January 1, 2001, the Company has not at any time delivered to, or
received from, any Firm Transportation Customer any formal written notice or
written allegation of a default or breach with respect to any agreement,
contract or other arrangement and none of such Firm Transportation Customers
has, or, to the Sellers' knowledge, intends to terminate or not exercise any
option to renew or otherwise change significantly its relationship with the
Company.
(b) Schedule 2.21(b) sets forth a complete and correct list of the expansion
customers for the Expansion Projects ("Expansion Customers"). As of the date of
this Agreement, the Expansion Customers set forth on Schedule 2.21(b) have
signed valid and enforceable firm transportation service agreements or precedent
agreements.
SECTION 2.22. Insurance. (a) Schedule 2.22 sets forth a true and complete list
of all policies of property and casualty insurance, including crime insurance,
liability and casualty insurance, property insurance, business interruption
insurance, workers' compensation, excess or umbrella liability insurance and any
other type of property and casualty insurance insuring the properties, assets,
employees and/or operations of the Company or any Subsidiary (collectively, the
"Policies"). Upon request, the Sellers will make available to the Buyers
certificates of insurance and insurance summaries from the insurance broker
evidencing the existence of the Policies. All premiums payable under such
Policies have been paid in a timely manner and the Company has complied fully
with the terms and conditions of all such Policies.
(b) Except as set forth on Schedule 2.22, all such Policies are in full force
and effect and except as provided in Section 4.15, coverage of the Company and
its Subsidiaries under the Policies will terminate upon the Closing Date. The
Sellers shall use their reasonable best efforts to cause the Company and its
Subsidiaries to maintain the coverage under all Policies (or replacements
thereof for Policies expiring prior to the Closing Date) in full force and
effect through the Closing Date. Neither the Company nor any Subsidiary is in
default under any provisions of the Policies, and there is no claim by the
Company, any Subsidiary or any other person pending under any of the Policies as
to which coverage has been questioned, denied or disputed by the underwriters or
issuers of such Policies. Except as set forth on Schedule 2.22, neither the
Company nor any Subsidiary has received written notice from an insurance carrier
issuing any Policies that alteration of any equipment or any improvements
located on Real Property, purchase of additional equipment, or modification of
any of the methods of doing business of the Company or any Subsidiary, will be
required or suggested after the date hereof. The Policies maintained by the
Company and each Subsidiary are adequate in accordance with industry standards,
the requirements of any applicable agreements and are in at least the minimum
amounts required by, and are otherwise sufficient for purposes of, any currently
applicable law, rule, or regulation of any Federal, state or local government,
agency or authority, including, without limitation, environmental regulations.
All Policies are of at least like character and amount as are customarily
carried by like businesses similarly situated.
SECTION 2.23. Transactions with Directors, Officers and Affiliates. Except as
set forth on Schedule 2.23 and for inter-company services in the ordinary course
of business, since January 1, 2001, there have been no transactions between the
Company or any Subsidiary and any director, officer, employee, stockholder or
other "affiliate" (as such term is defined in Rule 405 under the Securities Act
of 1933, as amended (the "Securities Act")) of the Company, or any Subsidiary or
the Sellers, including, without limitation, loans, guarantees or pledges to, by
or for the Company or Subsidiary from, to, by or for any of such persons. Except
as set forth on Schedule 2.11(c), neither the Sellers nor any of their
"affiliates" (as such term is defined in Rule 405 under the Securities Act)
(other than the Company or any Subsidiary) owns or has any rights in or to any
of the assets, properties or rights used by the Company or any Subsidiary in the
ordinary course of their business.
SECTION 2.24. Environmental; Health and Safety Matters. (a) Except as set
forth on Schedule 2.24:
(i) the Company and each Subsidiary and their respective operations are in
material compliance with all applicable Environmental Laws and, in the case of
pipeline safety, prudent industry practices, and have been in material
compliance with Environmental Laws and, in the case of pipeline safety, prudent
industry practices, except for historical non-compliance that would not
reasonably be expected to result in the Company or any Subsidiary incurring
material Environmental Costs and Liabilities;
(ii) none of the Sellers, the Company or any Subsidiary has received any written
request for information, or has been notified that it is a potentially
responsible party, under CERCLA (as hereinafter defined) or any similar state
law with respect to any on-site or off-site location for which liability is
currently being asserted against them with respect to the activities or
operations of the Company or its Subsidiaries;
(iii) there are no material writs, injunctions, decrees, orders or judgments
outstanding, or any actions, suits, proceedings or investigations pending or to
their knowledge threatened, involving the Company or any Subsidiary relating to
(A) their compliance with any Environmental Law, or (B) the release, disposal,
discharge, spill, treatment, storage or recycling of Hazardous Materials into
the environment at any location which would reasonably be expected to result in
the Company or any Subsidiary incurring any material liability under
Environmental Laws;
(iv) the Company and each Subsidiary have obtained, currently maintain and are
in material compliance with all Licenses which are required under Environmental
Laws for the operation of their respective businesses (collectively,
"Environmental Permits"), all such Environmental Permits are in effect and no
appeal nor any other action is pending to revoke any such Environmental Permit;
(v) to the extent that the Company will require additional Environmental Permits
for the operation of its business during construction of the Expansion Projects
or in connection with the Expansion Projects, all necessary applications for
such Environmental Permits due as of the Closing in accordance with the
Construction Budgets and Schedules set forth on Schedule 2.19(b) have been or
will be made in a timely fashion;
(vi) the Company has no knowledge of any reason why any such Environmental
Permit that has been applied for, but not yet granted, will not be obtained
without undue burden and in form and substance sufficient to permit (A) the
continued lawful conduct of the Company's business during construction of the
Expansion Projects, and (B) the lawful conduct of the Company's business with
respect to the Expansion Projects as such business is expected to be conducted;
(vii) the Company has no knowledge of any reason why any Environmental Permit
required for the operation of its business during construction of the Expansion
Projects or in connection with the Expansion Projects that has not yet been
applied for will not be obtained without undue burden and in form and substance
sufficient to permit the (A) continued lawful conduct of the Company's business
during construction of the Expansion Projects, and (B) the lawful conduct of the
Company's business with respect to the Expansion Projects as such business is
expected to be conducted;
(viii) all such Environmental Permits are transferable and the Sellers and the
Company will cooperate with the Buyers to secure any required transfer of those
Environmental Permits;
(ix) no cleanup, investigation or remedial action has occurred at the properties
that are currently owned, leased, operated or otherwise used by the Company or
any Subsidiary that could result in the assertion or creation of a lien on such
property by any Governmental Authority with respect thereto and for which the
Company or any Subsidiary would be responsible, nor has any such assertion of a
lien been made by any Governmental Authority with respect thereto which has not
been removed;
(x) there are no material Environmental Costs and Liabilities which may arise
against them based on their activities prior to the Closing Date at the
properties that are currently, or previously were, owned, leased, operated or
otherwise used by the Company or any Subsidiary;
(xi) there have been no Pipeline ruptures resulting in injury, loss of life, or
material property damage; and
(xii) to the knowledge of the Company and its Subsidiaries, there are no
defects, corrosion or other damage to the Pipeline that would create a material
risk of pipeline integrity failure.
(b) The following terms shall have the following meanings:
"Environmental Claim" shall mean any notice of violation,
action, claim, lien, demand, abatement or other order or directive (conditional
or otherwise) by any Person or Governmental Authority for personal injury
(including sickness, disease or death), tangible or intangible property damage,
damage to the environment (including natural resources), nuisance, pollution,
contamination, trespass or other adverse effects on the environment, or for
fines, penalties or restrictions resulting from or based upon (i) the existence,
or the continuation of the existence, of a Release (including, without
limitation, sudden or non-sudden accidental or non-accidental Releases) of, or
exposure to, any Hazardous Material, odor or audible noise; (ii) the
transportation, storage, treatment or disposal of Hazardous Materials; or (iii)
the violation, or alleged violation, of any Environmental Laws or Permits issued
thereunder.
"Environmental Costs and Liabilities" shall mean any and all
claims (including Environmental Claims), actions, suits, proceedings,
liabilities (whether absolute or contingent), obligations, losses (including
liquidated damages or losses arising out of lender liability claims), damages
(including any penalty or punitive damages), judgments, offsets, equitable
relief granted, amounts paid in settlement, awards, demands, counterclaims,
clean-up obligations, interest, costs and expenses (including the reasonable
fees of attorneys, consultants, engineers and other experts), and court costs
(and other out-of-pocket expenses incurred in investigating, preparing, or
defending the foregoing or with respect to any appeal) arising under or pursuant
to any Environmental Law.
"Environmental Law" shall mean current local, county, state,
federal, and/or foreign law (including common law), statute, code, ordinance,
rule, regulation or other legal obligation relating to the protection of the
environment or natural resources, including, without limitation, the
Comprehensive Environmental Response Compensation and Liability Act (42 U.S.C.
section 9601 et seq.), as amended ("CERCLA"), the Resource Conservation and
Recovery Act (42 U.S.C. section 6901 et seq.), as amended ("RCRA"), the Federal
Water Pollution Control Act (33 U.S.C. section 1251 et seq.), as amended, the
Clean Air Act (42 U.S.C. section 7401 et seq.), as amended, the Toxic Substances
Control Act (15 U.S.C. section 2601 et seq.), as amended, the Occupational
Safety and Health Act (29 U.S.C. section 651 et seq.), as amended, the Federal
Natural Gas Pipeline Safety Act of 1968, as amended, the Hazardous Materials
Transportation Act (49 U.S.C. section 1801 et seq.), as amended, the Oil
Pollution Act (33 U.S.C. section 2701 et seq.), the Safe Drinking Water Act (42
U.S.C. section 300(f) et seq.), as amended, analogous state, tribal or local
laws, and any similar, implementing or successor law, and any amendment, rule,
regulation, or directive issued thereunder.
"Hazardous Material" shall mean any substance, material or
waste which is regulated by any Environmental Law as hazardous, toxic, a
pollutant, contaminant or words of similar meaning including, without
limitation, petroleum, petroleum products, asbestos, urea formaldehyde and
polychlorinated biphenyls.
"Release" shall mean any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing of a Hazardous Material.
(c) To the extent a representation or warranty is set forth in this Section 2.24
and the same subject matter is covered in another representation or warranty in
this Agreement, the provisions covering such subject matter in this Section 2.24
shall govern.
SECTION 2.25. Brokers. Except as set forth on Schedule 2.25, the Sellers have
not employed the services of a broker or finder in connection with this
Agreement or any of the transactions contemplated hereby.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE BUYERS
The Buyers hereby jointly and severally represent and warrant
as follows:
SECTION 3.1. Corporate Organization. Each of Buyer Holdco, Buyer1 and Buyer2 is
a limited liability company duly organized, validly existing and in good
standing under the laws of the state of Delaware and has all requisite power and
authority to own its properties and assets and to conduct its business as now
conducted. Buyer Parent is a corporation duly organized, validly existing and in
good standing under the laws of the state of Iowa and has all requisite power
and authority to own its properties and assets and to conduct its business as
now conducted. Each of Buyer1 and Buyer2 is duly qualified to do business as a
foreign entity in every jurisdiction where the character of the properties owned
or leased by it or the nature of the business conducted by it makes such
qualifications necessary.
SECTION 3.2. Validity of Agreement. Each of the Buyers has the power to enter
into this Agreement and to carry out its obligations hereunder. The execution
and delivery of this Agreement and the performance of the Buyers' obligations
hereunder have been duly authorized by the Boards of Directors of the Buyers,
and no other proceedings on the part of the Buyers are necessary to authorize
such execution, delivery and performance. This Agreement has been duly executed
by the Buyers and constitutes the valid and binding obligation of the Buyers
enforceable against the Buyers in accordance with its terms (except to the
extent that its enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or other similar law affecting the enforcement of
creditors' rights generally or by general equitable principles).
SECTION 3.3. No Conflict or Violation; No Defaults. The execution, delivery and
performance by the Buyers of this Agreement does not and will not violate or
conflict with any provision of their Organizational Documents and does not and
will not violate any applicable provision of law, or any order, judgment or
decree of any Governmental Authority, nor violate or result in a breach of or
constitute (with due notice or lapse of time or both) a default under any
contract, lease, loan agreement, mortgage, security agreement, trust indenture
or other agreement or instrument to which the Buyers are a party or by which
they are bound or to which any of their properties or assets is subject, nor
result in the creation or imposition of any Encumbrance upon any of their
properties or assets where such violations, breaches or defaults in the
aggregate would have a material adverse effect on the transactions contemplated
hereby or on the assets, properties, business, operations, net income or
financial condition of the Buyers.
SECTION 3.4. Consents and Approvals. Except as disclosed on Schedule 3.4, no
material consent, approval or authorization of, or filing, registration or
qualification with, any Governmental Authority or any other person (on the part
of the Buyers) is required as a condition to the execution and delivery of this
Agreement by the Buyers or the performance of the Buyers' obligations hereunder.
SECTION 3.5. Brokers. Except as set forth on Schedule 3.5, the Buyers have not
employed the services of an investment broker, financial advisor, broker or
finder in connection with the Agreement or any of the transactions contemplated
hereby.
SECTION 3.6. Financial Ability. Buyer1 and Buyer2 will have sufficient
immediately available funds, in cash, at the Closing to pay the Purchase Price,
other amounts payable pursuant to this Agreement and to effect the transactions
contemplated hereby.
ARTICLE IV.
COVENANTS
SECTION 4.1. Certain Changes and Conduct of Business. (a) Except as expressly
provided by this Agreement or Schedule 4.1, from and after the date of this
Agreement and until the Closing Date, (x) the Company shall, and shall cause
each of its Subsidiaries to, conduct and maintain its business solely in the
ordinary course consistent with past practices and, (y) without the prior
written consent of the Buyers (not to be unreasonably withheld or delayed), the
Sellers will not permit the Company or any of its Subsidiaries to:
(i) make any material change in the conduct of its businesses and operations;
(ii) make any change in its Organizational Documents or issue any additional
equity securities or grant any option, warrant or right to acquire any equity
securities or issue any security convertible into or exchangeable for its equity
securities or alter any term of any of its outstanding securities or make any
change in its outstanding equity securities or other ownership interests or in
its capitalization, whether by reason of a reclassification, recapitalization,
stock split or combination, exchange or readjustment of shares, stock dividend
or otherwise;
(iii) other than inter-company advances to fund the Expansion Projects or
otherwise in the ordinary course of business, (A) incur, assume or guarantee any
indebtedness for borrowed money, issue any notes, bonds, debentures or other
corporate securities or grant any option, warrant or right to purchase any
thereof, or (B) issue any securities convertible or exchangeable for debt
securities of the Company or any Subsidiary;
(iv) make any sale, assignment, transfer, abandonment or other conveyance of any
of its assets or any part thereof except for dispositions of inventory or of
worn-out or obsolete equipment for fair or reasonable value in the ordinary
course of business consistent with past practices;
(v) subject any of its assets, or any part thereof, to any Encumbrance other
than a Permitted Encumbrance, or permit the imposition of any Encumbrance other
than a Permitted Encumbrance;
(vi) redeem, retire, purchase or otherwise acquire, directly or indirectly, any
of its equity interests or declare, set aside or pay any dividends or other
distribution in respect of such equity interests;
(vii) acquire any assets or properties other than in the ordinary course of
business consistent with past practices;
(viii) enter into any new employee benefit plan, program or arrangement or any
new employment, severance or consulting agreement, grant any general increase in
the compensation of officers or employees (including any such increase pursuant
to any bonus, pension, profit-sharing or other plan or commitment) or grant any
increase in the compensation payable or to become payable to any employee,
except in accordance with pre-existing contractual provisions;
(ix) make or commit to make any capital expenditure or to invest, advance, loan,
pledge or donate any monies to any clients or other persons or to make any
similar commitments with respect to outstanding bids or proposals except as
disclosed on Schedule 4.1;
(x) pay, except in the ordinary course of business consistent with past
practices, loan or advance any amount to, or sell, transfer or lease any
properties or assets to, or enter into any agreement or arrangement with, any of
its affiliates;
(xi) take any other action that would cause any of the representations and
warranties made herein not to remain true and correct in all material respects;
(xii) make any loan, advance or capital contribution to or investment in any
person except as disclosed on Schedule 2.7;
(xiii) make any change in any method of accounting or accounting principle,
method, estimate or practices except for any such change required by reason of a
concurrent change in RAP or write-down the value of any inventory, revalue any
asset or write-off as uncollectible any accounts receivable except in the
ordinary course of business consistent with past practices;
(xiv) make, change or revoke, or permit to be made, changed or revoked, any
election or method of accounting with respect to Taxes affecting or relating to
the Company;
(xv) enter into, or permit to be entered into, any closing or other agreement or
settlement with respect to Taxes affecting or relating to the Company;
(xvi) other than routine compliance filings, make any filings or submit any
documents or information to FERC without prior consultation with the Buyers;
(xvii) Entry into any agreement or amendment, modification, or termination of
any contract, lease, or license to which the Company or any Subsidiary is a
party, or by which it or any of its assets or properties are bound, except those
agreements, amendments, modifications or terminations affected in the ordinary
course of business consistent with past practices; or
(xviii) commit itself to do any of the foregoing.
(b) From and after the date hereof and until the Closing Date, the Sellers shall
cause the Company and each Subsidiary to:
(i) keep its books of account, records and files in the ordinary course
and in accordance with existing practices;
(ii) use reasonable efforts to continue to maintain existing business
relationships with affiliates, suppliers and customers to the extent that such
relationships are, at the same time, reasonably judged by the Sellers to be
economically beneficial to the Company acting reasonably;
(iii) use reasonable efforts to keep available the services of its
present officers;
(iv) comply in all material respects with all Environmental Laws, and
should any Seller or the Company receive notice that there exists a
material violation of any Environmental Law or a material condition requiring
removal or other remedial measures with respect to the real properties owned,
operated or leased by the Company or any Subsidiary or their respective
operations, the Sellers shall promptly notify the Buyers in writing and unless
such notice is being contested in good faith, shall promptly (and in any event
within the time permitted by the applicable Governmental Authority) (A) as to
areas over which the Sellers exercise control, remove or remedy such violation
or condition in accordance with all Environmental Laws and (B) as to other
areas, use their reasonable best efforts to have such violation or condition
removed or remedied in accordance with all Environmental Laws; and
(v) comply in all material respects with its Licenses and terms and
conditions of service provided by FERC.
(c) From and after the date hereof and until the Closing Date, the Sellers shall
continue to provide services to the Company and its Subsidiaries in the ordinary
course of business consistent with past practices.
SECTION 4.2. Access to Properties and Records. The Sellers shall afford, and
shall cause the Company to afford, to the Buyers and the Buyers' accountants,
counsel and representatives full reasonable access during normal business hours
throughout the period prior to the Closing Date (or the earlier termination of
this Agreement pursuant to Article VII hereof) to all the Company's and its
Subsidiaries' properties, books, contracts, Commitments and records (including,
but not limited to, all environmental studies, reports and other environmental
records) and, during such period, shall furnish promptly to the Buyers all
information concerning the Company's and its Subsidiaries' business, properties,
liabilities and personnel as the Buyers may request, provided that no
investigation or receipt of information pursuant to this Section 4.2 shall
affect any representation or warranty of the Sellers or the conditions to the
obligations of the Buyers. At the Closing, all of the books of accounts, minute
books, record books and other records (including safety, health, environmental,
maintenance and engineering records and drawings) of the Company and each
Subsidiary will be delivered to the Buyers.
SECTION 4.3. Employee Matters. (a) The Buyers may offer to employ Business
Employees under such terms and conditions as the Buyers may determine subject,
however, to the terms and provisions of this Section 4.3 and the Workforce
Agreement. All Business Employees that accept the Buyers' offer of employment
shall become the Buyers' employees as of the Transfer Date and all such Business
Employees are hereinafter referred to as the "Transferred Employees." The
"Transfer Date" shall be the Closing Date for all Transferred Employees except
those Transferred Employees identified as "Restricted GTC Employees" pursuant to
the terms and provisions of the Workforce Agreement. The Transfer Date for the
Restricted GTC Employees shall be 180 days after the Closing Date, or such other
date as mutually agreed by the parties to this Agreement.
(b) Transferred Employees shall participate in employee benefit plans and
programs of the Buyers on the same basis as other similarly situated employees
of the Buyers.
(c) Each Transferred Employee shall, without duplication of benefits, be given
credit for all service with the Sellers prior to the Transfer Date, using the
same methodology used by the Sellers as of immediately prior to the Transfer
Date for crediting service and determining levels of benefits (i) under all
employee benefit plans, programs and arrangements maintained by or contributed
to by the Buyers (including, without limitation, the Company) in which the
Transferred Employees become participants for purposes of eligibility to
participate, vesting and determination of level of benefits (excluding, however,
benefit accrual under any defined benefit plans), and (ii) for purposes of
calculating the amount of each Transferred Employee's severance benefits, if
any.
(d) The Buyers will, or will cause the Company to, (i) waive all limitations as
to preexisting conditions exclusions and waiting periods with respect to
participation and coverage requirements applicable to the Transferred Employees
under any welfare benefit plans that such employees may be eligible to
participate in after the Transfer Date, other than limitations or waiting
periods that are already in effect with respect to such employees and that have
not been satisfied as of the Transfer Date under any welfare plan maintained for
the Transferred Employees immediately prior to the Transfer Date, and (ii)
provide each Transferred Employee with credit for any co-payments and
deductibles paid prior to the Transfer Date in satisfying any applicable
deductible or out-of-pocket requirements under any welfare plans that such
employees are eligible to participate in after the Transfer Date.
(e) Effective as of the Transfer Date, Transferred Employees shall become fully
vested in their account balances in any defined contribution or 401(k) Plan
maintained by the Seller on behalf of such Transferred Employees (the "Seller
Savings Plan") and distributions of such account balances shall be made
available to such Transferred Employees as soon as practicable following the
Transfer Date, in accordance with, the provisions of the Seller Savings Plan and
applicable law. Except as provided in this Section 4.3(e), all such
distributions shall be in cash. Thereafter, the Buyers shall accept rollover
contributions from the Seller Savings Plan into a defined contribution or 401(k)
Plan maintained by the Buyers (the "Buyers Savings Plan") of the account
balances distributed to the Transferred Employees from the Seller Savings Plan.
With respect to any Transferred Employee who elects to make a direct rollover to
the Buyers Savings Plan and whose account is subject to an outstanding loan as
of the Transfer Date, such employee's distribution shall include a promissory
note for the outstanding balance of the loan as of the date of distribution.
With respect to any Transferred Employee whose account balance includes shares
of Seller Parent stock, such employee may elect to have such shares of stock
rolled over into the directed investments option under the Buyers Savings Plan.
(f) With respect to the transition of benefits coverage, any Transferred
Employee who is unable to participate in the health plans of the Buyers as of
the Transfer Date and elects continuation coverage under the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended, with respect to the
health plans of the Sellers, shall be reimbursed by the Buyers for the period
commencing on the Transfer Date and ending on the date health plan coverage is
made available to such Transferred Employee under the Buyers' health plans, for
the portion of the health care premium that would have been paid by the Sellers
had such Transferred Employee continued in the employment of the Sellers during
such period.
(g) The Buyers and the Sellers agree to cooperate as necessary to effectuate the
provisions of this Section 4.3, including such steps as may reasonably be
required to (i) service any outstanding Seller Savings Plan loans under account
balances of Transferred Employees between the date of such employees commence
employment with the Buyers and the date that such employees' account balances
are distributed, and (ii) ensure an orderly transition of benefits coverage with
respect to the Transferred Employees from the Employee Plans to the Buyers'
plans.
(h) Each Transferred Employee shall, without duplication of benefits, be given
credit for all accrued but unused paid-time-off under the Sellers' paid-time-off
program as of the Transfer Date, using the same methodology used by the Sellers
immediately prior to the Transfer Date for crediting service and determining the
amount of such paid-time-off benefits.
SECTION 4.4. Consents and Approvals. The Sellers and the Buyers shall each use
their reasonable best efforts to obtain, or, in the case of the Sellers, cause
the Company to obtain, all necessary consents, waivers, authorizations and
approvals of all Governmental Authorities, and of all other persons required in
connection with the execution, delivery and performance by them of this
Agreement.
SECTION 4.5. Further Assurances. Upon the request of the Buyers at any time
after the Closing Date, the Sellers will promptly execute and deliver such
further instruments of assignment, transfer, conveyance, endorsement, direction
or authorization and other documents as the requesting party or parties or its
or their counsel may reasonably request in order to perfect title of the Buyers
and its successors and assigns to the Interests or otherwise to effectuate the
purposes of this Agreement.
SECTION 4.6. Reasonable Best Efforts. Upon the terms and subject to the
conditions of this Agreement, each of the parties hereto will use its reasonable
best efforts to take, or cause to be taken, all action, and to do, or cause to
be done, all things necessary, proper or advisable consistent with applicable
law to consummate and make effective in the most expeditious manner practicable
the transactions contemplated hereby. The Sellers and the Buyers shall seek
early termination of the waiting period under the ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder
(the "HSR Act").
SECTION 4.7. Notice of Breach. Through the Closing Date, each of the parties
hereto shall promptly give to the other parties written notice with
particularity upon having knowledge of any matter that may constitute a breach
of any representation, warranty, agreement or covenant contained in this
Agreement. The Sellers shall have the right to supplement the Disclosure
Schedules with respect to any matter arising after the date hereof which would
have been required to be set forth on or described in such Disclosure Schedule
(a "Disclosure Schedule Update"). Any such supplemental disclosure will not be
deemed to have been disclosed as of the date of this Agreement for purposes of
determining whether the conditions set forth in Article V have been satisfied,
but such update shall be deemed to have cured any breach of representation,
warranty, covenant or agreement relating to the matters set forth in such update
for purposes of indemnification pursuant to Article VIII.
SECTION 4.8. Confidential Information. During the period commencing on the date
of this Agreement and ending on the second anniversary of the Closing Date
hereunder, except as required by law or stock exchange rule or under its
obligations pursuant to the Services Agreement (as defined in Section 5.9), the
Sellers and their affiliates shall not, directly or indirectly, disclose to any
person or entity or use any information not in the public domain or generally
known in the industry, in any form, whether acquired prior to or after the
Closing Date, relating to the business and operations of the Company or any
Subsidiary, including but not limited to information regarding customers,
vendors, suppliers, trade secrets, training programs, manuals or materials,
technical information, contracts, systems, procedures, mailing lists, know-how,
trade names, improvements, price lists, financial or other data (including the
revenues, costs or profits associated with any of the Company's services),
business plans, code books, invoices and other financial statements, computer
programs, software systems, databases, discs and printouts, plans (business,
technical or otherwise), customer and industry lists, correspondence, internal
reports, personnel files, sales and advertising material, telephone numbers,
names, addresses or any other compilation of information, written or unwritten,
which is or was used by the Company or any Subsidiary, regardless of whether
such information was or is owned on the date hereof by the Company or any
Subsidiary (collectively, "Protected Information"); provided, however, that if
any of the Sellers or their affiliates are presently in possession of Protected
Information that (x) is necessary to use in the ordinary course of business of
Seller Parent or any controlled affiliate of Seller Parent other than the
Company or any of its Subsidiaries (collectively, "Seller Parent and its Other
Subsidiaries") and (y) cannot reasonably be redacted, segregated or otherwise
separated from information about or owned by Seller Parent and its Other
Subsidiaries which is necessary to use in the ordinary course of business of
Seller Parent and its Other Subsidiaries (hereinafter, "Mixed Information"),
then the Protected Information which is so imbedded in such Mixed Information
may be used by Seller Parent and its Subsidiaries in the ordinary course of
business; provided, that Seller Parent and its Subsidiaries may not use any such
Protected Information to compete or seek to compete with the business or
operations of the Company or any of its Subsidiaries. Upon the request of the
Company, Seller Parent and its Other Subsidiaries shall reasonably cooperate
with the Company in the development of procedures intended to further implement
the intent of this Section 4.8.
SECTION 4.9. Non-Solicitation of Clients and Employees. (a) During the period
commencing on the date of this Agreement and ending on the second anniversary of
the Closing Date hereunder, neither the Sellers nor any affiliate thereof shall
for themselves or on behalf of or in conjunction with any person, directly or
indirectly, solicit, endeavor to entice away from the Company, or otherwise
directly or indirectly interfere with the relationship of the Company with any
person who, to the knowledge of the Sellers, is employed by the Company;
provided, however neither the Sellers nor any affiliates thereof shall be
precluded from soliciting or hiring any such employee (i) who initiates
discussions regarding such employment without any direct or indirect
solicitation by the Sellers; (ii) whose employment with the Company has been
terminated prior to commencement of employment with the Sellers; or (iii) who
responds to a general solicitation of employment not specifically addressed to
such employees. Notwithstanding the foregoing, the Sellers may continue to
employ each Business Employee until such time as such Business Employee becomes
a Transferred Employee.
(b) During the period commencing on the date of this Agreement and ending on the
second anniversary of the Closing Date hereunder, neither the Buyers nor any
affiliate thereof shall for themselves or on behalf of or in conjunction with
any person, directly or indirectly, solicit, endeavor to entice away from the
Sellers, or otherwise directly or indirectly interfere with the relationship of
the Sellers with any person who, to the knowledge of the Buyers, is employed by
the Sellers; provided, however, neither the Buyers nor any affiliates thereof
shall be precluded from soliciting or hiring any such employee (i) who initiates
discussions regarding such employment without any direct or indirect
solicitation by the Buyers; (ii) whose employment with the Sellers has been
terminated prior to commencement of employment with the Buyers; or (iii) who
responds to a general solicitation of employment not specifically addressed to
such employees. Notwithstanding the foregoing, the Buyers shall be permitted to
solicit, make offers of employment to, engage in follow-up discussions with and
hire Business Employees as permitted under Section 4.3 and the Workforce
Agreement.
(c) During the period commencing on the date of this Agreement and ending on the
second anniversary of the Closing Date hereunder, neither the gas transportation
pipeline companies owned by the Sellers on the date hereof nor any controlled
affiliate thereof shall for themselves or on behalf of or in conjunction with
any person, directly or indirectly, for purposes of providing interstate
transportation of natural gas and related services, solicit, endeavor to entice
away from the Company, or otherwise interfere with the relationship of the
Company with any person who, to the knowledge of the Sellers is, or was within
the then most recent 12 month period, a customer of the Company (hereinafter, a
"Company Customer"); provided, that, notwithstanding the foregoing, the Sellers
and their affiliates may solicit additional business from any Company Customer
who is then a customer of the Seller or any of its affiliates if such additional
business relates primarily to gas transportation or related services to be
provided by the Seller or such affiliate entirely within the geographic area in
which the Seller or such affiliate then conducts business or if such
solicitation would not otherwise compete with services which are provided by the
Company on the Closing Date to such Company Customer or any proposed expansion
or extension of such services to such Company Customer as contemplated on the
Closing Date.
(d) During the period commencing on the date of this Agreement and ending on the
second anniversary of the Closing Date hereunder, neither the Company nor any
controlled affiliate thereof shall for themselves or on behalf of or in
conjunction with any person, directly or indirectly, for purposes of providing
interstate transportation of natural gas and related services, solicit, endeavor
to entice away from the Sellers, or otherwise interfere with the relationship of
the Sellers with any person who, to the knowledge of the Buyers is, or was
within the then most recent 12 month period, a customer of the Sellers
(hereinafter, a "Seller Customer"); provided, that, notwithstanding the
foregoing, the Buyers and their affiliates may solicit additional business from
any Seller Customer who is then a customer of the Buyer or any of its affiliates
if such additional business relates primarily to gas transportation or related
services to be provided by the Buyers or such affiliate entirely within the
geographic area in which the Buyers or such affiliate then conducts business or
if such solicitation would not otherwise compete with services which are
provided by the Sellers on the Closing Date to such Seller Customer or any
proposed expansion or extension of such services to such Seller Customer as
contemplated on the Closing Date.
SECTION 4.10. Negotiations. From and after the date hereof, neither the Sellers
nor the Company, nor their officers, directors, employees, affiliates,
stockholders, representatives, agents, nor anyone acting on behalf of them
shall, directly or indirectly, encourage, solicit, engage in discussions or
negotiations with, or provide any information to, any person, firm, or other
entity or group (other than the Buyers or their representatives) concerning any
merger, sale of assets, purchase or sale of Interests or similar transaction
involving the Company or any division or Subsidiary thereof unless this
Agreement is terminated pursuant to and in accordance with Article VII hereof.
The Sellers shall promptly communicate to the Buyers any inquiries or
communications concerning any such transaction which they may receive or of
which they may become aware.
SECTION 4.11. Tax Covenants. (a) The Sellers shall prepare and file all Federal,
state and local income Tax Returns with the appropriate Federal, state, local
and foreign governmental agencies relating to the Company for periods ending on
or prior to the Closing Date and shall pay all Taxes due with respect to such
Tax Returns. The Sellers covenant that the Sellers shall be responsible for (i)
to the extent not reflected in the Final Closing Statement, all liability for
Federal, state or local income Taxes of the Company for all periods ending on or
before the Closing Date; (ii) to the extent not reflected on the Final Closing
Statement, all liability for other Taxes of the Company for Pre-Closing Tax
Periods (as defined herein); and (iii) all liability imposed upon the Company or
any Subsidiary for Taxes of any other person pursuant to Treasury Regulation
Section 1.1502-6 or any similar provision of state or local law, but only to the
extent such liability relates to periods ending on or prior to the Closing Date.
The Sellers shall cause the Company to prepare and file all other Tax Returns
related to the Company that are due on or prior to the Closing Date and shall
cause the Company to pay all Taxes due with respect to such Tax Returns. For all
other Tax Returns related to the Company for periods ending on or prior to the
Closing Date, but for which such Tax Returns are not due until after the Closing
Date, the Sellers shall (i) prepare such Tax Returns in accordance with the
terms and conditions set forth in the Services Agreement (as defined herein),
and (ii) submit such Tax Returns to the Buyers for signature, filing and payment
of Tax, all in accordance with the terms and conditions set forth in the
Services Agreement. The Sellers shall prepare and shall submit to the Buyers for
signature, filing and payment of Tax, all Straddle Tax Returns required to be
filed by the Company, provided, however, that the Sellers shall promptly
reimburse the Buyers for the portion of such Tax that relates to a Pre-Closing
Tax Period to the extent not reflected on the Final Closing Statement. The
Buyers will furnish to the Sellers all information and records reasonably
requested by the Sellers for use in preparation of any Tax Returns. The Sellers
shall allow the Buyers to review, comment upon and reasonably approve without
undue delay any Straddle Tax Return at any time during the 45-day period
immediately preceding the filing of such Tax Return. The Buyers and the Sellers
agree to cause the Company to file all Tax Returns for any Straddle Period on
the basis that the relevant taxable period ended as of the close of business on
the Closing Date, unless the relevant Tax authority will not accept a Tax Return
filed on that basis. For purposes of this Agreement, "Pre-Closing Tax Period"
shall mean any taxable period ending on or before December 31, 2001 and the
portion ending on and including December 31, 2001 of any Straddle Period. For
purposes of this Agreement, "Straddle Period" shall mean any taxable period that
includes (but does not end on) December 31, 2001 and ends after the Closing
Date. For purposes of this Agreement, "Straddle Tax Return" shall mean any Tax
Return with respect to Taxes other than income taxes required to be filed by the
Company covering a taxable period commencing prior to December 31, 2001 and
ending after the Closing Date. The Sellers' covenants in respect of
responsibility for Taxes as set forth above in this Section 4.11(a) are in no
way intended to be duplicative of the adjustments reflected in the Purchase
Price pursuant to Section 1.4.
(b) The Sellers will cause any tax sharing agreement or similar arrangement with
respect to Taxes involving the Company or any Subsidiary to be terminated
effective as of the Closing Date, to the extent any such agreement or
arrangement relates to the Company or any Subsidiary, and after the Closing Date
neither the Company nor any Subsidiary shall have any obligation under any such
agreement or arrangement for any past, present or future period.
(c) All excise, sales, use, transfer (including real property transfer or
gains), stamp, documentary, filing, recordation and other similar taxes,
together with any interest, additions or penalties with respect thereto and any
interest in respect of such additions or penalties, resulting directly from the
transactions contemplated by this Agreement (the "Transfer Taxes"), shall be
borne by the party on which such Transfer Taxes are imposed by applicable law.
Notwithstanding anything to the contrary in this Section 4.11, any Tax Returns
that must be filed in connection with Transfer Taxes shall be prepared and filed
when due by the party primarily or customarily responsible under the applicable
local law for filing such Tax Returns, and such party will use reasonable
commercial efforts to provide such Tax Returns to the other party at least 10
days prior to the due date for such Tax Returns.
(d) The Sellers and the Buyers will use their reasonable best efforts to agree
on an allocation of the Purchase Price within 90 days of the Closing Date and
such agreed upon allocation of the Purchase Price shall be binding on both the
Buyers and the Sellers for Tax purposes.
SECTION 4.12. Development of Migration Plan. The parties agree to negotiate in
good faith to develop, document and implement a mutually agreed upon migration
plan that shall set forth the details and process for the creation of the
Company's computer technology systems (the "Migration Plan"). The Migration Plan
shall include without limitation, the terms set forth in, and be prepared
consistent with the guidelines set forth on Schedule 4.12 and be implemented by
the Sellers on or before the expiration of the Service Period (as defined in the
Services Agreement). The costs for implementation of the Migration Plan shall be
as set forth in Section 3 of the Services Agreement.
SECTION 4.13. Guarantees. Buyer Parent guarantees performance by Buyer Holdco,
Buyer1 and Buyer2 of their obligations under this Agreement. Seller Parent
guarantees performance by Holdco, LLC1 and LLC2 of their obligations under this
Agreement.
SECTION 4.14. Bonds. The Sellers shall use their reasonable best efforts to
maintain the Bonds until they are released and replaced by the Buyers. "Bonds"
shall mean all surety bonds, letters of credit, guarantees, cash collateral,
performance bonds and bid bonds issued by the Seller and their affiliates (other
than the Company and its Subsidiaries) on behalf of the Company or any
Subsidiary. The Buyers shall use their reasonable best efforts to replace and
release the Bonds as promptly as reasonably practicable after the Closing Date
but in no event later than 60 days from the Closing Date. The Buyers shall
indemnify, defend and hold harmless the Sellers and their affiliates for any and
all liability, loss, damage, cost and expense incurred on account of such Bonds
after the Closing Date.
SECTION 4.15. Insurance. The Sellers shall maintain coverage of the Company and
its Subsidiaries under the Property/Time Element Policy listed on Schedule 2.22
until its scheduled expiration date at no cost to the Buyers or the Company. The
Sellers shall use their reasonable best efforts to maintain the coverage of the
Company and its Subsidiaries under each of the other Policies set forth on
Schedule 2.22 (except the Directors and Officers Liability Policy) until their
scheduled expiration dates, for the proportionate premium cost of such Policies
as set forth on Schedule 2.22 for the period such Policies remain in effect. To
the extent after the Closing such Policies still cover the Company and its
Subsidiaries, the Company shall promptly notify the Sellers of any potential
claim or loss under such Policies and it shall be the Sellers' responsibility to
notify the insurance company of any claims or losses and to submit and
diligently pursue any claims or losses under such Policies with respect to the
Company and its Subsidiaries. The Buyers, the Company and its Subsidiaries agree
that they shall not notify the insurance company or submit any claim or loss to
the insurance company under such Policies. After the Closing, the Buyers, the
Company and its Subsidiaries shall be responsible for any deductible or
retention amounts with respect to claims or losses relating to the Company or
its Subsidiaries under such Policies.
SECTION 4.16. Audited Financial Statements. The Sellers shall use their
reasonable best efforts to provide the Audited Financial Statements (as defined
in Section 5.13) to the Buyers no later than March 15, 2002.
SECTION 4.17. Master Alliance Agreement. Prior to the Closing, the Sellers and
the Company shall use their reasonable best efforts to seek amendments to each
Master Alliance Agreement and each request for service, contract, agreement or
commitment relating thereto set forth on Schedule 4.17 to provide that upon the
Closing, the Buyers and the Company will have the right to request and receive,
and the other party thereto the obligation to perform, the services provided
therein in accordance with the terms of each request for service and the Master
Alliance Agreement; provided, however that the foregoing shall not obligate the
Sellers to incur any costs (other than nominal costs) to amend the terms of
their agreements with such parties unrelated to the Company or otherwise agree
to any non-ministerial concession or other arrangement with such parties or any
other person.
SECTION 4.18. Expansion Projects. Between the date of the execution of this
Agreement and the Closing Date, the Sellers shall cause the Company to:
(a) develop the Expansion Projects diligently in accordance with the applicable
material contracts and permits and Budgets and Schedules for the Expansion
Projects, not make any material changes to the Budgets and Schedules, and
consult with the Buyers on a regular basis regarding same (including cooperating
with reasonable requests by the Buyers);
(b) promptly notify the Buyers of, and reasonably consult with the Buyers on,
any material event or circumstance that arises affecting any of the Expansion
Projects;
(c) promptly deliver to the Buyers copies of any notices or correspondence
received from, or provided to, any Governmental Authority or from any party to
any contract which is material to the Expansion Projects; and
(d) without the prior consent of the Buyers (not to be unreasonably withheld or
delayed), not enter into any material contract relating to the Expansion
Projects except those contracts set forth on Schedule 4.18, and not grant any
consent or waiver under, terminate, or amend any contract material to the
Expansion Projects.
SECTION 4.19. Covenant to Assign. (a) Prior to or concurrent with Closing the
Sellers shall, and shall cause the Sellers' affiliates to, at the Sellers' sole
option, either (i) assign to the Company all of their respective right, title
and interest in the Operational Assets (as defined below), and secure any
consents necessary for such assignment and for the use of such Operational
Assets by the Sellers and the Sellers' affiliates on behalf of the Company or
the Buyers as part of the Transition Services and the Migration Plan (as
applicable), or (i) obtain for the Buyers, on terms acceptable to the Buyers
(such acceptance not to be unreasonably withheld or delayed), comparable
replacements for any Operational Assets not assigned pursuant to (ii) above. All
such assignments shall be effectuated pursuant to instruments in form and
substance reasonably satisfactory to the Buyers, executed copies of which shall
be delivered to the Buyers at Closing. The "Operational Assets" shall mean each
item contained in Schedule 2.11(c) (other than the Headquarters Building located
in Salt Lake City identified on Schedule 2.11(c) and the lease related thereto),
and any other property, rights, and equipment (including without limitation,
furniture, computer hardware, servers, routers and PBX equipment) owned by,
leased or licensed to the Sellers or the Sellers' affiliates which can be
assigned prior to or concurrent with the Closing and which is (1) used by the
Sellers, the Sellers' affiliates, the Company or its Subsidiaries, to conduct
the business of the Company or the Subsidiaries, as currently conducted, or (2)
intended to be used in connection with the Expansion Projects, as well as any
Sellers or Sellers' affiliate agreements for the maintenance, support or service
of any of the foregoing listed in (1) or (2).
(b) On or before the expiration of the Services Period (as defined in the
Services Agreement), the Sellers shall, and shall cause the Sellers' affiliates
to, at the Sellers' sole option, either (i) assign to the Company all of their
respective right, title and interest in the Operational IT Assets (as defined
below), including license and contract rights, and secure any consents necessary
for such assignment and for the use by the Sellers and the Sellers' affiliates
on behalf of the Company or the Buyers as part of the Transition Services and
the Migration Plan (as applicable), or (ii) obtain for the Buyers, on terms
acceptable to the Buyers (such acceptance not to be unreasonably withheld or
delayed), comparable replacements for any Operational IT Assets not assigned
pursuant to (i) above. All such assignments shall be effectuated pursuant to
instruments in form and substance reasonably satisfactory to the Buyers,
executed copies of which shall be delivered to the Buyers on or before the
expiration of the Services Period. The "Operational IT Assets" shall mean each
item contained in Schedule 2.13(a), other property, rights and equipment that
could not be assigned as of Closing, and all intellectual property that, in each
case, is owned by, leased or licensed to the Sellers and the Sellers' affiliates
(including through application service providers) and (1) used by the Sellers,
the Sellers' affiliates, the Company or its Subsidiaries to conduct the business
of the Company or the Subsidiaries, as currently conducted, or (2) intended to
be used in connection with the Expansion Projects, as well as any Sellers or
Sellers' affiliate agreements for the maintenance, support or service of any of
the foregoing listed in (1) or (2).
(c) All of the Operational Assets and Operational IT Assets shall be assigned or
replaced, as the case may be, at no cost to the Buyers or the Company except for
replacement costs of hardware and software acquired pursuant to the Migration
Plan, the costs for which shall be borne by the parties as set forth in Section
3 of the Services Agreement.
SECTION 4.20. Manuals. The Sellers shall deliver (and shall cause the Sellers'
affiliates to deliver) to the Company, and the Buyers copies of, and hereby
grant to the Company, its Subsidiaries, the Buyers and their affiliates a
nonexclusive, nontransferable (except in connection with the sale or transfer of
all or substantially all of the assets of the Company), royalty free license,
without right to sublicense, in perpetuity to use, copy, and modify solely for
their internal business purposes in connection with the business of the Company,
all manuals, user guides, standards and operating procedures and similar
documents used by the Company, the Subsidiaries, the Sellers and/or the Sellers'
affiliates in connection with the business of the Company. All copies of the
foregoing must reproduce and include all copyright and other intellectual
property rights notices provided by Sellers.
SECTION 4.21. Trademark License. Effective upon the Closing, the Sellers and the
Sellers' affiliates hereby grant to the Company, its Subsidiaries and the Buyers
a nonexclusive, nontransferable, royalty free license to use, solely in the
Company's and its Subsidiaries' businesses as presently conducted or as
contemplated to be conducted in connection with the Expansion Projects, any and
all trademarks, service marks, and trade names owned by the Sellers and the
Sellers' affiliates solely to the extent appearing on existing inventory of the
Company and its Subsidiaries (such as on marketing and other materials),
advertisements, or property (such as on vehicles, equipment, pipelines and
signs) (collectively "Sellers' Marks"), without right to sublicense, for a
period of one year from the Closing Date (the "License Period"). The Buyers and
the Company may use such existing inventory, advertising and property during the
License Period. The Buyers and the Company shall not create new inventory,
advertising and property using the Sellers' Marks, and shall otherwise use
commercially reasonable efforts to replace or remove the Sellers' Marks on
inventory, advertising and property, provided that, all such use shall cease no
later than the end of the License Period. The nature and quality of all uses of
the Sellers' Marks made by the Buyer, the Company and its Subsidiaries shall
conform to the Sellers' existing quality standards; provided, that, the way in
which the Sellers' Marks are currently used is hereby deemed to meet such
quality standards. Immediately upon termination of the License Period, the
Buyers, the Company and its Subsidiaries shall cease and desist from all further
use of the Sellers' Marks and will adopt new trademarks, service marks, and
trade names related thereto which are not confusingly similar to Sellers' Marks.
All rights not expressly granted in this Section 4.21 with respect to the
Sellers' Marks are hereby reserved. Any inadvertent failure of the Buyers to
comply with their obligations under this provision shall not be a breach of this
Agreement unless the Buyers fail to use commercially reasonable efforts to
promptly remedy such failure after receipt of written notice from the Sellers or
to remedy such failure within 30 days of such notice, in which case the Sellers
may terminate this trademark license upon written notice to the Buyers and the
Company.
SECTION 4.22. Software License. Effective upon the Closing, the Sellers, for
themselves and on behalf of the Sellers' affiliates, hereby grant to the
Company, the Buyers and their affiliates, a nonexclusive, royalty free,
perpetual license, without right to sublicense, to use, copy, modify, enhance,
and upgrade all computer software (object code and source code) owned by the
Sellers and/or the Sellers' affiliates and used in connection with the business
of the Company as presently conducted or as contemplated to be conducted in
connection with the Expansion Projects (the "Licensed Software") solely for
their internal business purposes. The modifications, enhancements and upgrades
made to the Licensed Software by the Buyers or the Company after the date of
delivery pursuant to the Migration Plan shall not infringe any intellectual
property or other proprietary rights of any third party. All copies of the
Licensed Software and related documentation must reproduce all copyright and
other intellectual property rights notices included thereon. As specified in the
Migration Plan (and if not specified therein, at the Closing) the Sellers shall
deliver (or shall cause the Sellers' affiliates to deliver) copies of the
Licensed Software and all manuals and documentation related thereto including
(at no charge to the Company or the Buyers) all modifications, enhancements and
upgrades made to or for the Licensed Software to the date of delivery.
Notwithstanding the foregoing, neither the Buyers nor the Company have the right
to transfer to a third party (other than an affiliate of the Buyers or the
Company for use in accordance with the restrictions of this Section) any rights
in the Licensed Software except in connection with the sale or transfer of all
or substantially all of the Company's assets. The Company and the Buyers shall
not be entitled to receive, and Sellers and the Sellers' affiliates shall have
no obligation to provide, any modifications, enhancements, or upgrades made to
the Licensed Software which they develop subsequent to the delivery date;
provided that, any such modifications, enhancement or upgrades made by the
Sellers or the Sellers' affiliates during the Service Period, as defined in the
Services Agreement, shall be delivered to the Buyers at the Buyers' request and
shall be paid for by the Buyers as Transition Services (as defined in the
Services Agreement). The parties hereby acknowledge and agree that, as between
Sellers and the Sellers' affiliates on the one hand, and the Company and the
Buyers on the other: (a) except as set forth in this section, all right, title
and interest, including all intellectual property rights, in the Licensed
Software are the exclusive property of the Sellers and the Sellers' affiliates;
(b) Sellers and the Sellers' affiliates shall at all times retain ownership of
the intellectual property rights in the Licensed Software; (c) the Company and
the Buyer have no rights in the Licensed Software except as expressly granted
herein; and (d) the Company and the Buyer will not take any action or permit any
action to be taken with respect to such intellectual property rights
inconsistent with the foregoing acknowledgment. The Sellers represent and
warrant that the Sellers or the Sellers' affiliates own all right, title and
interest in and to the Licensed Software or otherwise have the right to grant
the license granted herein and the Licensed Software does not infringe any third
party rights. Except as expressly provided in this Section 4.22, the Licensed
Software and associated materials are provided on an "as is" basis. The Sellers
and the Sellers' affiliates shall not be deemed to have made, and the Sellers
and the Sellers' affiliates hereby expressly disclaim, any implied guarantee or
implied warranty (whether arising under statute or otherwise in law or from a
course of dealing or usage of trade) as to the: (i) condition; (ii) design;
(iii) operation; (iv) performance; (v) reliability of the results generated or
output; (vi) non-infringement; (vii) merchantability; and (viii) fitness for a
particular purpose or intended use, of the Licensed Software and associated
materials. The Sellers and the Sellers' affiliates do not warrant that the
Licensed Software or associated materials provided are error-free or that the
Company's and the Buyer's use thereof will be uninterrupted.
ARTICLE V.
CONDITIONS TO OBLIGATIONS OF THE BUYERS
The obligations of the Buyers to consummate the transactions contemplated by
this Agreement are subject to the fulfillment, at or before the Closing Date, of
the following conditions, any one or more of which may be waived by the Buyers
in their sole discretion:
SECTION 5.1. Receipt of Documents. The Sellers shall have delivered to the
Buyers, a duly executed ▇▇▇▇ of Sale and any other documents the Buyers may
reasonably require relating to the existence of the Sellers, the Company, any
Subsidiary and the authority of the Sellers and the Company for this Agreement,
all in form and substance reasonably satisfactory to the Buyers.
SECTION 5.2. Representations and Warranties of the Sellers. All representations
and warranties made by the Sellers in this Agreement shall be true and correct
in all material respects on and as of the Closing Date as if again made by the
Sellers on and as of such date, and, the Buyers shall have received a
certificate dated the Closing Date and signed by the President or any Vice
President of each of the Sellers to that effect.
SECTION 5.3. Performance of the Sellers' Obligations. Each of the Sellers shall
have performed in all material respects all obligations required under this
Agreement to be performed by it on or before the Closing Date, and the Buyers
shall have received a certificate dated the Closing Date and signed by the
President or any Vice President of each of the Sellers to that effect.
SECTION 5.4. Consents and Approvals. The consents, waivers, authorizations and
approvals set forth on Schedule 5.4 shall have been duly obtained and shall be
in full force and effect on the Closing Date. All applicable waiting periods
under the HSR Act shall have expired or been terminated.
SECTION 5.5. No Violation of Orders. No preliminary or permanent injunction or
other order issued by any Governmental Authority, nor any statute, rule,
regulation, decree or executive order promulgated or enacted by any Governmental
Authority, which declares this Agreement invalid or unenforceable in any respect
or prevents the consummation of the transactions contemplated hereby, shall be
in effect; and no action or proceeding before any Governmental Authority, shall
have been instituted by a Governmental Authority or other person or threatened
by any Government Authority, which seeks to prevent or delay the consummation of
the transactions contemplated by this Agreement or which challenges the validity
or enforceability of this Agreement.
SECTION 5.6. No Material Adverse Change. During the period from December 31,
2001 to the Closing Date, there shall not have been any change, or any event
which has had, or would reasonably be expected to have a Material Adverse
Effect, nor shall there have been (a) the loss of Firm Transportation Customers
that have generated in the aggregate more than 4% of the Company's revenues in
the last 12 months; (b) a general rate proceeding initiated by the Company under
Section 4 or by FERC under Section 5 of the NGA; (c) physical damage to the
Company's Pipeline which significantly impairs the operation of the Pipeline or
causes a substantial decrease in the output of the Pipeline for a period of more
than two weeks; (d) aggregate losses to the Company in excess of $25 million or
bona fide claims for damages against the Company in aggregate in excess of $50
million, in each case net of reasonably expected insurance recoveries; and/or
(e) a material adverse development in the Company's application pending before
the FERC for a certificate of public convenience and necessity related to the
2003 Expansion Project that is reasonably expected to delay commencement of
project construction beyond December 31, 2002.
SECTION 5.7. Intentionally deleted.
SECTION 5.8. Opinion of Counsel. The Buyers shall have received a favorable
opinion, dated as of the Closing Date, from counsel to the Sellers, in form and
substance reasonably satisfactory to the Buyers and its counsel, substantially
in the form of Schedule 5.8 hereto.
SECTION 5.9. Transition Services and Construction Management Agreement. Seller
Parent shall have executed a Transition Services and Construction Management
Agreement (the "Services Agreement"), the form of which is attached as Schedule
5.9 hereto.
SECTION 5.10. Resignations. The officers and directors of the Company and its
Subsidiaries set forth on Schedule 5.10 shall have delivered letters of
resignation from their respective positions to the Buyers in a form reasonably
acceptable to the Buyers.
SECTION 5.11. Seller Parent Stock Purchase. All conditions to the obligations of
the parties to the Stock Purchase Agreement dated of even date herewith between
Seller Parent and Buyer Parent to consummate the transactions contemplated by
such agreement shall have been satisfied or waived (other than conditions set
forth in Sections 6(g) and 7(e) of such agreement) and Seller Parent shall be
ready, willing and able to close such transaction.
SECTION 5.12. Tax Certificate. (a) The Sellers shall have delivered to the
Buyers a FIRPTA Certificate in the form of Schedule 5.12.
(b) The Sellers shall have delivered to the Buyers any clearance certificates or
similar documents that may be required by any state Tax authority in order to
relieve the Buyers of any obligation to withhold any portion of the Purchase
Price.
SECTION 5.13. Financial Statements. (a) The Sellers shall have delivered to the
Buyers, at least three (3) business days prior to the Closing Date, a true and
correct copy of the audited balance sheet of the Company as of December 31,
2001, together with the related statements of income, partners' equity and cash
flow for the period then ended and the notes thereto (the "Audited Financial
Statements").
(b) The Audited Financial Statements shall not reflect a negative variance of
more than 5% from any of the amounts shown as Total Assets, Total Liabilities,
Partner's Capital, Operating Revenue, Operating Expenses or Net Income in the
unaudited 2001 Financial Statements and shall not reflect any other material
change in any disclosures contained in any of the Notes thereto or contain any
material Notes not contained in the unaudited 2001 Financial Statements, from
the unaudited 2001 Financial Statements.
SECTION 5.14. Ratings. After giving effect to the transactions contemplated by
this Agreement, there shall be No Ratings Downgrade (as such term is defined in
that certain Indenture, dated as of August 13, 2001, by and among Kern River
Funding Corporation, the Company and The Chase Manhattan Bank (the "Notes
Indenture").
SECTION 5.15. Workforce Agreement. The Sellers shall have entered into a
Workforce Agreement (the "Workforce Agreement"), the form of which is attached
as Schedule 5.15 hereto.
ARTICLE VI.
CONDITIONS TO OBLIGATIONS OF THE SELLERS
The obligations of the Sellers to consummate the transactions contemplated by
this Agreement are subject to the fulfillment, at or before the Closing Date, of
the following conditions, any one or more of which may be waived by the Sellers
in their sole discretion:
SECTION 6.1. Representations and Warranties of the Buyers. All representations
and warranties made by the Buyers in this Agreement shall be true and correct in
all material respects on and as of the Closing Date as if again made by the
Buyers on and as of such date, and, the Sellers shall have received a
certificate dated the Closing Date and signed by the President or any Vice
President of each of Buyer Holdco, Buyer 1 and Buyer 2 and Buyer Parent to that
effect.
SECTION 6.2. Performance of the Buyers' Obligations. Each of the Buyers shall
have performed in all material respects all obligations required under this
Agreement to be performed by it on or before the Closing Date, and the Sellers
shall have received a certificate dated the Closing Date and signed by the
President or any Vice President of each of Buyer Holdco, Buyer 1 and Buyer 2 and
Buyer Parent to that effect.
SECTION 6.3. Consents and Approvals. All consents, waivers, authorizations and
approvals as set forth on Schedule 6.3 shall have been duly obtained and shall
be in full force and effect on the Closing Date. All applicable waiting periods
under the HSR Act shall have expired or been terminated.
SECTION 6.4. No Violation of Orders. No preliminary or permanent injunction or
other order issued by any Governmental Authority, nor any statute, rule,
regulation, decree or executive order promulgated or enacted by any Governmental
Authority, that declares this Agreement invalid or unenforceable in any respect
or prevents the consummation of the transactions contemplated hereby shall be in
effect; and no action or proceeding before any Governmental Authority, shall
have been instituted by a Governmental Authority or other person or threatened
by any Governmental Authority which seeks to prevent or delay the consummation
of the transactions contemplated by this Agreement or which challenges the
validity or enforceability of this Agreement.
SECTION 6.5. Seller Parent Stock Purchase. All conditions to the obligations of
the Parties to the Stock Purchase Agreement dated of even date herewith between
Seller Parent and Buyer Parent to consummate the transactions contemplated by
such agreement shall have been satisfied or waived (other than conditions set
forth in Sections 6(g) and 7(e) of such agreement) and Buyer Parent shall be
ready, willing and able to close such transaction.
SECTION 6.6. Opinion of Counsel. The Sellers shall have received a favorable
opinion, dated as of the Closing Date, from counsel to the Buyers, in form and
substance reasonably satisfactory to the Sellers and its counsel, substantially
in the form of Schedule 6.6 hereto.
SECTION 6.7. Services Agreement. Buyer Parent shall have executed the Services
Agreement, the form of which is attached as Schedule 5.9 hereto.
SECTION 6.8. Ratings. After giving effect to the transactions contemplated by
this Agreement, there shall be No Ratings Downgrade (as such term is defined in
the Notes Indenture).
SECTION 6.9. Workforce Agreement. The Buyers shall have entered into a
Workforce Agreement, the form of which is attached as Schedule 5.15 hereto.
SECTION 6.10. Receipt of Documents. The Buyers shall have delivered to the
Sellers such duly executed documents as the Sellers may reasonably require
relating to the existence of the Buyers and the authority of the Buyers, all in
form and substance reasonably satisfactory to the Sellers.
ARTICLE VII.
TERMINATION AND ABANDONMENT
SECTION 7.1. Methods of Termination; Upset Date. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned at any time
before the Closing:
(a) by the mutual written consent of the Sellers and the Buyers;
(b) by the Sellers, in the event that the Buyers fail to comply with any of
their covenants or agreements contained herein, or breach their representations
and warranties contained herein, and such failure to comply or breach, if
curable, is not cured within 10 days after receipt by the Buyers of notice
specifying particularly such failure to comply or breach, and such failure to
comply or breach would result in a failure to satisfy the conditions set forth
in Section 6.1 and/or 6.2;
(c) by the Buyers, in the event that the Sellers fail to comply with any of
their covenants or agreements contained herein, or breach their representations
and warranties contained herein, and such failure to comply or breach, if
curable, is not cured within 10 days after receipt by the Sellers of notice
specifying particularly such failure to comply or breach, and such failure to
comply or breach would result in the failure to satisfy the conditions set forth
in Sections 5.2 and/or 5.3;
(d) by the Sellers or the Buyers, in the event that a Governmental Authority
shall have issued an order, decree or ruling or taken any other action (which
order, decree or ruling the parties hereto shall use their reasonable best
efforts to lift), which permanently restrains, enjoins or otherwise prohibits
the transactions contemplated by this Agreement and which order, decree, ruling
or other action is not subject to appeal;
(e) by the Sellers or the Buyers at any time after June 15, 2002; or
(f) by the Sellers or the Buyers, in the event that the Stock Purchase Agreement
dated even date herewith between Seller Parent and Buyer Parent has been
terminated.
SECTION 7.2. Procedure Upon Termination. In the event of termination and
abandonment of this Agreement pursuant to Section 7.1, written notice thereof
shall forthwith be given to the other party hereto and this Agreement shall
terminate and the transactions contemplated hereby shall be abandoned, without
further action by the Sellers or the Buyers. If this Agreement is terminated as
provided herein, no party to this Agreement shall have any liability or further
obligation to any other party to this Agreement except as provided in Sections
9.4 and 9.5 hereof; provided, however, that no termination of this Agreement
pursuant to this Article VII shall relieve any party of liability for a grossly
negligent or willful, and in either case, material breach of any provision of
this Agreement occurring before such termination; and, provided, further, that
(x) if this Agreement is terminated by the Sellers or the Buyers pursuant to
Section 7.1(e) and (y) at such time, assuming that the specified consents under
the Revolvers and the "progeny" agreements described on Schedule 6.3 (the
"Specified Consents") had been obtained (i) all of the conditions to the
obligations of the Sellers to consummate the transactions contemplated by this
Agreement set forth in Article VI shall have been fulfilled or shall have been
waived by the Sellers and (ii) all of the conditions of the Buyers to consummate
the transactions contemplated by this Agreement set forth in Article V shall
have been fulfilled or shall have been waived by the Buyers or could reasonably
have been expected to be waived by the Buyers, then the Sellers shall pay to the
Buyers the sum of $25,000,000.00 in immediately available funds on or prior to
the second business day after the date of delivery of notice of such
termination. Notwithstanding the foregoing, if all of the conditions to the
obligations of both the Sellers and the Buyers to consummate the transactions
contemplated by this Agreement shall have been fulfilled or shall have been
waived and pursuant to Section 1.2 the Closing would occur on June 16, 2002,
then the date referred to in Section 7.1(e) shall be deemed to be June 16, 2002.
ARTICLE VIII.
INDEMNIFICATION
SECTION 8.1. Survival. The respective representations and warranties of the
parties hereto contained herein or in any certificates or other documents
delivered pursuant to this Agreement on the Closing shall survive the Closing
until July 31, 2003; provided however, that the representations and warranties
set forth in Section 2.2 (Capitalization; Title) shall survive indefinitely, the
representations and warranties set forth in Section 2.24 (Environmental; Health
and Safety Matters) shall survive until the fifth anniversary of the Closing
Date and the representations and warranties in Section 2.9 (Taxes) shall survive
for a period equal to the applicable statute of limitations.
SECTION 8.2. Indemnification Coverage. (a) Notwithstanding the Closing or the
delivery of the Interests and regardless of any investigation at any time made
by or on behalf of the Buyers or of any knowledge or information that the Buyers
may have the Sellers shall indemnify and agree to defend, save and hold the
Buyers, the Company and each of their officers, directors, employees, agents and
affiliates (other than the Sellers) (collectively, the "Buyer Indemnified
Parties") harmless if any such Buyer Indemnified Party shall at any time or from
time to time suffer any damage, judgment, fine, penalty, demand, settlement,
liability, loss, cost, Tax, expense (including reasonable attorneys',
consultants' and experts' fees), claim or cause of action (each, a "Loss")
arising out of, relating to or resulting from:
(i) any breach or inaccuracy in any representation by the Sellers or the breach
of any warranty by the Sellers contained in this Agreement or any certificates
or other documents delivered pursuant to this Agreement on Closing;
(ii) any failure by the Sellers to perform or observe any term, provision,
covenant, or agreement on the part of the Sellers to be performed or observed
under this Agreement; and
(iii) Legal Proceedings set forth on Schedule 8.2.
(b) Notwithstanding the Closing or the delivery of the Interests and regardless
of any investigation at any time made by or on behalf of the Sellers or of any
knowledge or information that the Sellers may have, the Buyers shall indemnify
and agree to defend, save and hold the Sellers and their officers, directors,
employees, agents and affiliates (collectively, the "Seller Indemnified
Parties") harmless if any such Seller Indemnified Party shall at any time or
from time to time suffer any Loss arising out of, relating to, or resulting
from:
(i) any breach or inaccuracy in any representation by the Buyers or the breach
of any warranty by the Buyers contained in this Agreement or any certificates or
other documents delivered pursuant to this Agreement on Closing; and
(ii) any failure by the Buyers to perform or observe any term, provision,
covenant, or agreement on the part of the Buyers to be performed or observed
under this Agreement.
(c) The foregoing indemnification obligations shall be subject to the following
limitations:
(i) the Sellers' aggregate liability under Section 8.2(a) and the Buyers'
aggregate liability under Section 8.2(b) shall not, in either case, exceed 75%
of the Purchase Price (the "Cap"); provided, however, that the Cap shall not be
applicable to breaches under Section 2.2, 2.9 or 4.11 or Losses asserted against
the Sellers under Section 8.2(a)(iii);
(ii) no indemnification for any Losses asserted against the Buyers or the
Sellers, as the case may be, under Section 8.2(a) or Section 8.2(b) shall be
required unless and until the cumulative aggregate amount of such Losses exceeds
$8,000,000 (the "Threshold"), at which point the Sellers or the Buyers, as the
case may be, shall be obligated to indemnify the Indemnified Party (as
hereinafter defined) only as to the amount of such Losses in excess of
$1,000,000 (the "Deductible"), subject to the limitation in Section 8.2(c)(i);
provided, however, that the Threshold and the Deductible shall not be applicable
to breaches under Sections 1.4, 2.2, 2.9 or 4.11 or Losses asserted against the
Sellers under Section 8.2(a)(iii);
(iii) no indemnification for any Losses asserted against the Sellers under
Section 8.2(a) for a breach or inaccuracy of any representation under Section
2.9 or failure by the Sellers to perform any covenant under Section 4.11 shall
be required unless and until the cumulative aggregate amount of such Losses
exceeds $50,000, at which point the Sellers shall be obligated to indemnify the
Indemnified Party the full amount of such Losses;
(iv) the amount of any Losses suffered by a Seller Indemnified Party or a Buyer
Indemnified Party, as the case may be, shall be reduced by any third-party
insurance which such party receives in respect of or as a result of such Losses.
If any Losses for which indemnification is provided hereunder is subsequently
reduced by any third-party insurance or other indemnification benefit or
recovery, the amount of the reduction shall be remitted to the Indemnifying
Party (as hereinafter defined);
(v) no claim may be asserted nor may any action be commenced (A) against the
Sellers for breach or inaccuracy of any representation or breach of a warranty,
unless written notice of such claim or action is received by the Sellers
describing in reasonable detail the facts and circumstances with respect to the
subject matter of such claim or action on or prior to the date on which the
representation or warranty on which such claim or action is based ceases to
survive as set forth in Section 8.1 (it being agreed and understood that if a
claim for a breach of a representation or warranty is timely made, the
representation or warranty shall survive until the date on which such claim is
finally liquidated or otherwise resolved), or (B) against the Buyers for breach
or inaccuracy of any representation or breach of a warranty, unless written
notice of such claim or action is received by the Buyers describing in
reasonable detail the facts and circumstances with respect to the subject matter
of such claim or action on or prior to the date on which the representation or
warranty on which such claim or action is based ceases to survive as set forth
in Section 8.1 (it being agreed and understood that if a claim for a breach of a
representation or warranty is timely made, the representation or warranty shall
survive until the date on which such claim is finally liquidated or otherwise
resolved); and
(vi) an Indemnified Party shall not be entitled under this Agreement to multiple
recovery for the same Losses.
SECTION 8.3. Procedures. Any Indemnified Party shall notify the Indemnifying
Party (with reasonable specificity) promptly after it becomes aware of facts
supporting a claim or action for indemnification under this Article VIII, and
shall provide to the Indemnifying Party as soon as practicable thereafter all
information and documentation reasonably necessary to support and verify any
Losses associated with such claim or action. Subject to Section 8.2(v), the
failure to so notify or provide information to the Indemnifying Party shall not
relieve the Indemnifying Party of any liability that it may have to any
Indemnified Party, except to the extent that the Indemnifying Party demonstrates
that it has been materially prejudiced by the Indemnified Party's failure to
give such notice, in which case the Indemnifying Party shall be relieved from
its obligations hereunder to the extent of such material prejudice. The
Indemnifying Party shall defend, contest or otherwise protect the Indemnified
Party against any such claim or action by counsel of the Indemnifying Party's
choice at its sole cost and expense; provided, however, that the Indemnifying
Party shall not make any settlement or compromise without the prior written
consent of the Indemnified Party (which consent shall not be unreasonably
withheld or delayed) unless the sole relief provided is monetary damages that
are paid in full by the Indemnifying Party. The Indemnified Party shall have the
right, but not the obligation, to participate at its own expense in the defense
thereof by counsel of the Indemnified Party's choice and shall in any event use
its reasonable best efforts to cooperate with and assist the Indemnifying Party.
If the Indemnifying Party fails timely to defend, contest or otherwise protect
against such suit, action, investigation, claim or proceeding, the Indemnified
Party shall have the right to do so, including, without limitation, the right to
make any compromise or settlement thereof, and the Indemnified Party shall be
entitled to recover the entire cost thereof from the Indemnifying Party,
including, without limitation, reasonable attorneys' fees, disbursements and
amounts paid as the result of such suit, action, investigation, claim or
proceeding.
SECTION 8.4. Remedy. Absent fraud, and except for seeking equitable relief, from
and after the Closing the sole remedy of a party in connection with (i) a breach
or inaccuracy of the representations, or breach of warranties, in this Agreement
or any certificates or other documents delivered pursuant to this Agreement on
Closing, or (ii) any failure by a party to perform or observe any term,
provision, covenant, or agreement on the part of such party to be performed or
observed under this Agreement, shall, in each case, be as set forth in this
Article VIII.
ARTICLE IX.
MISCELLANEOUS PROVISIONS
SECTION 9.1. Common Facilities. For purposes of this Agreement, it is assumed
that the Company's tenant-in-common interest in the Common Facilities is an
asset of the Company. It is also understood that any representations (except in
Section 2.11(d)) regarding such asset are limited to the Sellers' knowledge.
SECTION 9.2. Publicity. On or prior to the Closing Date, neither party shall,
nor shall it permit its affiliates to, issue or cause the publication of any
press release or other announcement with respect to this Agreement or the
transactions contemplated hereby without the consent of the other party hereto.
Notwithstanding the foregoing, in the event any such press release or
announcement is required by law or stock exchange rule to be made by the party
proposing to issue the same, such party shall use its reasonable best efforts to
consult in good faith with the other party prior to the issuance of any such
press release or announcement.
SECTION 9.3. Successors and Assigns; No Third-Party Beneficiaries. This
Agreement shall inure to the benefit of, and be binding upon, the parties hereto
and their respective successors and assigns; provided, however, that neither
party shall assign or delegate any of the obligations created under this
Agreement without the prior written consent of the other party. Except as
contemplated by Article VIII, nothing in this Agreement shall confer upon any
person or entity not a party to this Agreement, or the legal representatives of
such person or entity, any rights or remedies of any nature or kind whatsoever
under or by reason of this Agreement.
SECTION 9.4. Investment Bankers, Financial Advisors, Brokers and Finders. (a)
The Sellers shall indemnify and agree to defend and hold the Buyers and the
Company harmless against and in respect of all claims, losses, liabilities and
expenses which may be asserted against the Buyers (or any affiliate of the
Buyers) by any broker or other person who claims to be entitled to an investment
banker's, financial advisor's, broker's, finder's or similar fee or commission
in respect of the execution of this Agreement or the consummation of the
transactions contemplated hereby, by reason of his acting at the request of the
Sellers or the Company.
(b) The Buyers shall indemnify and agree to save and hold the Sellers harmless
against and in respect of all claims, losses, liabilities, fees, costs and
expenses which may be asserted against them by any broker or other person who
claims to be entitled to an investment banker's, financial advisor's, broker's,
finder's or similar fee or commission in respect of the execution of this
Agreement or the consummation of the transactions contemplated hereby, by reason
of his acting at the request of the Buyers.
SECTION 9.5. Fees and Expenses. Except as otherwise expressly provided in this
Agreement, all legal, accounting and other fees, costs and expenses of a party
hereto incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such fees, costs or
expenses; provided, however that the Sellers shall be solely responsible for all
legal, accounting and other fees, costs and expenses incurred by the Sellers and
the Company. The Sellers, as a group, and the Buyers, as a group, shall each
bear one-half of the costs of HSR Act filing fees.
SECTION 9.6. Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made if delivered personally or sent by overnight courier or sent by
facsimile (with evidence of confirmation of receipt) to the parties at the
following addresses:
(a) If to the Buyers, to:
MidAmerican Energy Holdings Company, KR Holding, LLC, KR
Acquisition 1, LLC and KR Acquisition 2, LLC
c/o MidAmerican Energy Holdings Company
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇.
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
(b) If to the Sellers, to:
The ▇▇▇▇▇▇▇▇ Companies, Inc., ▇▇▇▇▇▇▇▇ Gas Pipeline
Company, LLC, ▇▇▇▇▇▇▇▇ Western Pipeline Company
LLC and Kern River Acquisition, LLC
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ von ▇▇▇▇, Esq.
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
or to such other persons or at such other addresses as shall be furnished by
either party by like notice to the other, and such notice or communication shall
be deemed to have been given or made as of the date so delivered or mailed. No
change in any of such addresses shall be effective insofar as notices under this
Section 9.6 are concerned unless such changed address is located in the United
States of America and notice of such change shall have been given to such other
party hereto as provided in this Section 9.6.
SECTION 9.7. Entire Agreement. This Agreement, together with the Disclosure
Schedules and the exhibits hereto, represent the entire agreement and
understanding of the parties with reference to the transactions set forth herein
and no representations or warranties have been made in connection with this
Agreement other than those expressly set forth herein or in the Disclosure
Schedules, exhibits, certificates and other documents delivered in accordance
herewith. This Agreement supersedes all prior negotiations, discussions,
correspondence, communications, understandings and agreements between the
parties relating to the subject matter of this Agreement and all prior drafts of
this Agreement, all of which are merged into this Agreement. No prior drafts of
this Agreement and no words or phrases from any such prior drafts shall be
admissible into evidence in any action or suit involving this Agreement.
SECTION 9.8. Waivers and Amendments. The Sellers, as a group, or the Buyers, as
a group, may by written notice to the other: (a) extend the time for the
performance of any of the obligations or other actions of the other; (b) waive
any inaccuracies in the representations or warranties of the other contained in
this Agreement or in any document delivered pursuant to this Agreement by the
other party; (c) waive compliance with any of the covenants of the other
contained in this Agreement; (d) waive performance of any of the obligations of
the other created under this Agreement; or (e) waive fulfillment of any of the
conditions to its own obligations under this Agreement or in any documents
delivered pursuant to this Agreement by the other party. The waiver by any party
hereto of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach, whether or not similar, unless
such waiver specifically states that it is to be construed as a continuing
waiver. This Agreement may be amended, modified or supplemented only by a
written instrument executed by the parties hereto.
SECTION 9.9. Severability. This Agreement shall be deemed severable, and the
invalidity or unenforceability of any term or provision hereof shall not affect
the validity or enforceability of this Agreement or of any other term or
provision hereof. Furthermore, in lieu of any such invalid or unenforceable term
or provision, the parties hereto intend that there shall be added as a part of
this Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be possible and be valid and enforceable.
SECTION 9.10. Titles and Headings. The Article and Section headings and any
table of contents contained in this Agreement are solely for convenience of
reference and shall not affect the meaning or interpretation of this Agreement
or of any term or provision hereof.
SECTION 9.11. Signatures and Counterparts. Facsimile transmission of any signed
original document and/or retransmission of any signed facsimile transmission
shall be the same as delivery of an original. At the request of the Buyers or
the Sellers, the parties will confirm facsimile transmission by signing a
duplicate original document. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
SECTION 9.12. Enforcement of the Agreement. The parties hereto agree that
irreparable damage would occur if any of the provisions of this Agreement were
not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereto, this being in addition to any
other remedy to which they are entitled at law or in equity. In no event shall
any party hereto be entitled to any punitive, incidental, indirect, special or
consequential damages resulting from or arising out of this Agreement or the
transactions contemplated hereby.
SECTION 9.13. Governing Law. This Agreement shall be governed by and construed
in accordance with the internal and substantive laws of Delaware and without
regard to any conflicts of laws concepts which would apply the substantive law
of some other jurisdiction.
SECTION 9.14. Certain Definitions. For purposes of this Agreement, the term:
(a) "affiliate" of a person means a person that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person;
(b) "Expansion Projects" means the 2002 Expansion Project, the 2003 Expansion
Project and the High Desert Project.
(c) "High Desert Project" means the design, construction and placing in service
of the additional lateral facilities to the Pipeline described in the
Application for Public Convenience and Necessity filed by the Company with the
FERC on July 18, 2001 for authority to construct, own and operate the High
Desert Lateral, Docket CP ▇▇-▇▇▇-▇▇▇.
(d) "Material Adverse Effect" means a material adverse effect on the assets,
properties, business, operations, net income or financial condition of the
Company and its Subsidiaries taken as a whole, or the prospects of the Company
and its Subsidiaries taken as a whole as such prospects relate to the Expansion
Projects, it being understood that none of the following shall be deemed to
constitute a Material Adverse Effect: (i) any effect resulting from entering
into this Agreement or the announcement of the transactions contemplated by this
Agreement; and (ii) any effect resulting from changes in the United States or
global economy as a whole, except for such effects which disproportionately
impact the Company and its Subsidiaries.
(e) "1Line System" means the nomination and scheduling system software developed
internally by the Sellers to replace the Rapids II system.
(f) "person" means an individual, corporation, association, trust, limited
liability company, limited partnership, limited liability partnership,
partnership, incorporated organization, other entity or group (as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934).
(g) "Pipeline" means the natural gas pipelines, lateral lines, Rights of Way,
easements, compressors, compressor stations and other related machinery and
equipment owned by the Company and used by the Company in the conduct of its
business.
(h) "2002 Expansion Project" means the design, construction and placing in
service of the facilities to expand the transportation capacity of the Pipeline
as described in the Application for Certificate of Public Convenience and
Necessity filed by the Company with the FERC on November 24, 2000 and now
pending in Docket CP ▇▇-▇▇-▇▇▇ for authority to construct, own and operate the
2002 Expansion Project facilities.
(i) "2003 Expansion Project" means the design, construction and placing in
service of the facilities to expand the transportation capacity of the Pipeline
as described in the Application for Certificate of Public Convenience and
Necessity filed by the Company with the FERC on August 1, 2001, and now pending
in Docket No. CP01-422-000, for authority to construct, own and operate the 2003
Expansion Project facilities.
SECTION 9.15. Consent to Jurisdiction; Exclusive Forum. With respect to any
suit, action or proceeding initiated by a party to this Agreement arising out
of, under or in connection with this Agreement or the transactions contemplated
hereby, each of the Sellers and the Buyers hereby submit to the exclusive
jurisdiction of any state or federal court sitting in the State of Delaware and
irrevocably waive, to the fullest extent permitted by law, any objection that
they may now have or hereafter obtain to the laying of venue in any such court
in any such suit, action or proceeding.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
THE ▇▇▇▇▇▇▇▇ COMPANIES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
▇▇▇▇▇▇▇▇ GAS PIPELINE COMPANY, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
▇▇▇▇▇▇▇▇ WESTERN PIPELINE COMPANY, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
KERN RIVER ACQUISITION, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
MIDAMERICAN ENERGY HOLDINGS COMPANY
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman and
Chief Executive Officer
KR HOLDING, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman
KR ACQUISITION 1, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
KR ACQUISITION 2, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
Schedule 8.2
Indemnification Coverage
Kern River Pending Litigation:
Will Price and Stixon Petroleum ▇. ▇▇▇▇▇▇▇▇ et al., ▇▇▇▇ ▇▇. ▇▇ ▇ ▇▇, ▇▇ the
Twenty-Sixth Judicial District, District Court, ▇▇▇▇▇▇▇ County, Kansas, Civil
Department (a/k/a/ Quinque), and any action containing the same or substantially
similar allegations arising out of or related to the actions of the Company
prior to the Closing Date.
In Re: Natural Gas Royalties Qui Tam Litigation, MDL Docket ▇▇. ▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ of Wyoming (consolidated matter that includes
United States of America ex rel. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Natural Gas
Company, et al., Civil Action ▇▇. ▇▇-▇-▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇ of Colorado), and any action containing the same or substantially
similar allegations arising out of or related to the actions of the Company
prior to the Closing Date.
Indemnification:
Any Loss suffered by the Buyers, the Company and each of their officers,
directors, employees, agents and affiliates (other than Sellers) (collectively,
the "Buyer Group") arising out of, relating to, resulting from or in connection
with (i) that certain Construction, Operating and Maintenance Agreement between
the Company and ▇▇▇▇▇▇▇▇ Communications Group, Inc. (undated but executed
sometime between July 17, 1998 and August 7, 1998), (ii) that certain Temporary
Right of Entry Agreement between the Company and ▇▇▇▇▇▇▇▇ Communications Group,
Inc. dated May 22, 1998, (iii) that certain Operation, Maintenance and Repair
Agreement between ▇▇▇▇▇▇▇▇ Communications Group, Inc. and the Company and other
▇▇▇▇▇▇▇▇ Company pipelines dated February 19, 1999, (iv) Legal Proceedings or
other Loss arising out of, relating to, resulting from or in connection with the
installation, operation, maintenance, removal or any other activity in respect
of fiber optic cable and appurtenant buildings and equipment by or for the
benefit of ▇▇▇▇▇▇▇▇ Communications Group, Inc. or its affiliates in right of way
where the Pipeline and associated facilities, equipment and appurtenances are
located, or (v) any other actions or omissions or liabilities in respect of
▇▇▇▇▇▇▇▇ Communications Group, Inc. or its affiliates, provided that the Sellers
shall have no indemnification obligation pursuant to clauses (i) through (v)
above, with respect to any Loss arising out of, relating to, resulting from or
in connection with (A) any actions or (except with respect to clause (iv) above)
omissions of any member of the Buyer Group after the Closing Date, (B) any
actions or omissions of any third party not affiliated with the Sellers after
the Closing Date, (C) any Acts of God, war, riot, fire, explosion, accident,
tornadoes, hurricanes, flood, acts of terrorism, sabotage occurring after the
closing Date or (D) the performance of services by Sellers under the terms and
provisions of the Transition Services and Construction Management Agreement (the
"Transition Agreement"), it being agreed that any indemnification for Losses
suffered by the Buyer Group in connection with the performance of services by
Sellers under the Transition Agreement will exclusively be governed by the
Transition Agreement.